Hanwha Group, which is focusing on defense and aerospace, has bought a large block of equity in rival Korea Aerospace Industries (KAI) for the first time in about seven years. The move is seen as a concrete step by Hanwha Group to expand its defense strategy from land, sea, and air into space. Hanwha Group and KAI plan to leverage each company's strengths to generate synergy over the mid to long term in areas such as fighter jets and satellites.
According to the defense industry on the 16th, Hanwha Group has secured a total of 4.99% (4,864,000 shares) in KAI equity, led by its defense affiliate Hanwha Aerospace (Hanwha Aerospace). The KAI equity purchased by Hanwha Aerospace is 4.41%. Earlier, on the 13th, Hanwha Systems said in a business report that it secured 0.58% (566,635 shares) in KAI equity for 59.9 billion won.
It has been seven years since Hanwha Group last purchased KAI equity, in 2018. At that time, as momentum for KAI's privatization weakened, Hanwha Aerospace sold 5.99% (5,847,511 shares) of KAI equity through a block trade after hours.
Hanwha Group said the equity purchase aims to solidify a mid- to long-term strategic partnership. KAI has developed not only aircraft such as the Korean fighter KF-21, helicopters, and unmanned aircraft, but also satellites. Hanwha Aerospace has demonstrated competitiveness in aircraft engines and space launch vehicles, and Hanwha Systems in areas such as radar and avionics. Based on each company's strengths, they aim to secure competitiveness in future aerospace businesses and in export markets.
Even before this equity purchase, Hanwha Group and KAI had formed a partnership, agreeing to cooperate on strengthening exports and building a bridgehead for overseas expansion of the KF-21, developing a long-range air-to-air missile, and proposing a performance upgrade program for special operations helicopters. In Feb., they signed a memorandum of understanding (MOU) for defense and space-aerospace cooperation and agreed to establish a mid- to long-term cooperation framework in future core business areas.
Hanwha Aerospace plans to steadily advance cooperation with KAI through this equity acquisition. Hanwha Group has the technology to manufacture aircraft engines and various avionics sensors, but has been relatively weak in aircraft platforms. That is why a strategic partnership with KAI, the country's only complete aircraft developer and manufacturer and a company with technological strength in satellite development and air combat systems, is important.
The same applies to the space business. Recently, the sector has been shifting to a private-led "New Space" regime rather than a government-led one. Hanwha Group plans to work with KAI in areas such as launch vehicles, satellites, and data analytics to build a comprehensive space infrastructure that includes everything from low Earth orbit satellites to medium- and large-sized satellites.
In the business community, there is analysis that the aerospace industry centered on this equity acquisition will effectively become the core management stage for Hanwha Group Vice Chairman Kim Dong-Kwan. While Hanwha Aerospace has achieved significant results in ground defense centered on the K9 self-propelled howitzer, the aerospace field is effectively just beginning. Kim previously marked aerospace as a future growth engine.
The industry is also watching whether KAI equity will be increased over the long term to exercise management control. Hanwha Group has long been cited as the most likely candidate should the Export-Import Bank sell its KAI equity. A Hanwha Group official said, "This equity acquisition is about securing competitiveness through cooperation."