Hanwha Group Chairman Kim Seung-yeon will gift half of his 22.65% equity stake in Hanwha Corporation to his three sons, totaling 11.32%.
On the 31st, Hanwha Corporation announced that Chairman Kim Seung-yeon will gift 4.86%, 3.23%, and 3.23% of his equity in Hanwha Corporation to Vice Chairman Kim Dong-kwan, President Kim Dong-won, and Vice President Kim Dong-sun, respectively.
After the gift, the equity ownership of Hanwha Corporation, which serves as the group's holding company, will be composed of 22.16% for Hanwha Energy, 11.33% for Chairman Kim Seung-yeon, 9.77% for Vice Chairman Kim Dong-kwan, 5.37% for President Kim Dong-won, and 5.37% for Vice President Kim Dong-sun. The three sons hold 100% of the equity in Hanwha Energy. Hanwha noted that the equity gift will complete the succession of management rights, resulting in a 42.67% stake in Hanwha Corporation for the three sons.
Hanwha stated, "Chairman Kim will retain his position as chairman of Hanwha Group after the equity gift and will continue to provide management consulting and global business support based on his professional management expertise and global network."
Hanwha explained that the decision to gift the equity was made to quickly resolve unnecessary controversies and misunderstandings related to the management rights succession and to focus on its core business. The aim is to block any association of the equity gift with the capital increase of Hanwha Aerospace and the acquisition of equity in Hanwha Ocean.
Hanwha noted, "With the completion of the succession through this equity gift, speculations and distortions that connect the urgent and essential large-scale overseas investment purpose of Hanwha Aerospace's capital increase with the succession will be dispelled," and added that the misconceptions around the claim, 'Hanwha Corporation is lowering its corporate value to merge with Hanwha Energy,' will also be corrected, alleviating concerns about shareholder value erosion.
As a result of this equity gift, Vice Chairman Kim Dong-kwan and others will have to pay a gift tax of 221.8 billion won (based on the average closing price from March 4 to 31). Hanwha stated, "We plan to transparently and faithfully pay taxes assessed as per the Inheritance and Gift Tax Act, based on the principles of responsible management."
Previously, when Chairman Kim gifted part of his equity in Hanwha Corporation in 2006-2007, his three sons paid 121.6 billion won in gift tax. Chairman Kim also paid 27.7 billion won in inheritance tax in 1981, the highest level at that time.
The stock price of Hanwha Corporation surged significantly after its subsidiary, Hanwha Aerospace, announced on Feb. 10 that it would acquire a portion of Hanwha Ocean's equity, reaching 52,300 won on March 10. Prior to that, the stock price had remained at 20,000 to 30,000 won for three years. It has exceeded 50,000 won for the first time in eight years, since August 2017. As of the 31st, the closing price of Hanwha Corporation is 40,950 won.
The assessment price for taxation will be determined based on the average stock price two months prior, around April 30. This is in accordance with the advance disclosure system for insider stock transactions of listed companies. Hanwha stated, "It has become impossible to argue that the decision to gift was made at a low stock price or that the stock price was intentionally lowered."
Hanwha Group stated, "This equity gift is intended to resolve controversies related to the succession and to focus on essential national key industries such as defense, shipbuilding, and aerospace, thereby contributing to the enhancement of corporate value and national economic development."