Hanwha Aerospace, which was pursuing a paid-in capital increase of 3.6 trillion won, reduced the scale of the increase to 2.3 trillion won amid controversy over management succession. The reduced 1.3 trillion won will be covered by Hanwha Energy, which is 100% owned by the founder’s family. Hanwha Aerospace acquired Hanwha Ocean's equity held by Hanwha Energy for 1.3 trillion won, and the decision to reduce the paid-in capital increase is seen as an attempt to dispel criticism that the founder's family's equity is being financed with company funds while the investment is being requested from shareholders.
On the 8th, Hanwha Aerospace announced at a board meeting that it would reduce the previously announced scale of the paid-in capital increase from 3.6 trillion won to 2.3 trillion won. Regarding the reduced 1.3 trillion won, three companies, including Hanwha Energy, Hanwha Impact, and Hanwha Energy Singapore, are considering participation in a third-party allocation paid-in capital increase. If this plan is confirmed, Hanwha Energy, where Chairman Kim Seung-yeon’s three sons are major shareholders, will participate in the capital increase without a discount. Hanwha Energy CEO Lee Jae-kyu noted, “This is to avoid unnecessary succession controversies.”
Earlier, Hanwha Aerospace purchased 7.3% of Hanwha Ocean equity held by Hanwha Impact (5.0%) and Hanwha Energy (2.3%) for 1.3 trillion won. This accounted for 94% of Hanwha Aerospace’s cash and cash equivalents (1.375 trillion won) as of the end of 2024. A week later, criticism arose when it was decided to pursue a paid-in capital increase of 3.6 trillion won due to the need for investment funds. This was because it appeared that the cash and cash equivalents were essentially being funneled to the chairman's three sons while securing investment funds from shareholders.
With the push for the largest paid-in capital increase in history, Hanwha Aerospace's stock price plummeted, and the Financial Supervisory Service (FSS) rejected Hanwha Aerospace's paid-in capital increase application. The FSS ordered the company to detail the reasons for choosing the paid-in capital increase, the timing of the increase, and the intended use of the funds, along with the restructuring of Hanwha Group's governance before and after the increase and its relevance to the capital increase. To end the inheritance controversy, on the 31st of last month, Hanwha transferred 11.32% of its equity held by Chairman Kim to Vice Chairman Kim Dong-kwan (4.86%), President Kim Dong-won (3.23%), and Vice President Kim Dong-seon (3.23%).
Hanwha attempted a direct confrontation regarding the management succession controversy but ultimately changed course after Lee Jae-myung, the leader of the Democratic Party, mentioned Hanwha’s case while discussing amendments to the Commercial Act. Lee stated, “There is a high possibility that the founder will gift the shares of the company that fell due to the paid-in capital increase to the children to reduce gift tax. Investors have suffered significant losses due to the paid-in capital increase. Will Prime Minister Han Duck-soo use a veto on the amendment to the Commercial Act?”
If Hanwha Energy participates in the paid-in capital increase of Hanwha Aerospace, the 1.3 trillion won from Hanwha Aerospace will effectively return to Hanwha Aerospace. A representative from Hanwha Aerospace explained, “Hanwha Energy buys shares at market value, effectively making the major shareholder bear the cost, while minority shareholders of Hanwha Aerospace benefit from this structure.” Hanwha Aerospace CEO Son Jae-il noted, “We are seeking measures to focus on our core business and move away from unnecessary logic.”