Hanwha Group is once again accelerating its efforts to expand its stake in Korea Aerospace Industries (KAI), adding weight to the possibility of a takeover bid for management control. Just two months after Hanwha Aerospace (012450) completed a 1 trillion won (approximately $664.4 million) share purchase, its affiliate Hanwha Systems (272210) is now taking up the baton, injecting up to an additional 500 billion won.<\/p>\n
According to defense and financial investment industry sources on the 9th, Hanwha Systems held a board meeting the previous day and decided to purchase KAI shares on the open market within a limit of 500 billion won by the end of the year. This move comes immediately after Hanwha Aerospace rapidly acquired approximately 1 trillion won worth of KAI shares through a tender offer and open market purchases that began in early May. Hanwha Aerospace disclosed on the 8th that it had completed its originally planned additional purchase of 500 billion won ahead of schedule.<\/p>\n
Currently, Hanwha Group’s stake in KAI by affiliate stands at 9.90% (approximately 9.65 million shares) for Hanwha Aerospace, 1.53% (approximately 1.48 million shares) for Hanwha Systems, and 1.01% (approximately 980,000 shares) for Hanwha Aerospace USA, bringing the group’s total stake to 12.44%. If Hanwha Systems fully deploys the 500 billion won to secure an additional 3.12 million shares, its stake would rise to 4.73%, pushing the group’s total stake to as high as 15.64%.<\/p>\n
This would further solidify its position as the second-largest shareholder, following the largest shareholder, the Export-Import Bank of Korea (26.41%). Notably, if the stake exceeds 15%, it becomes subject to a business combination filing under the Monopoly Regulation and Fair Trade Act, requiring a review by the Korea Fair Trade Commission to assess whether it restricts market competition \u2014 a point drawing keen industry attention.<\/p>\n
Hanwha Systems explained the background of the share purchase, stating it was “a decision made independently by the board considering synergies in the aerospace and defense sectors,” adding that it “judged there are many areas for future cooperation with KAI, including space industry investment and technology development.” Indeed, the two companies already maintain a close cooperative relationship, with Hanwha Systems supplying the Active Electronically Scanned Array (AESA) radar, a critical component for the KF-21 fighter jet produced by KAI.<\/p>\n
However, Hanwha drew a line, indicating that this decision does not immediately mean crossing the 15% stake threshold. A Hanwha Systems official emphasized, “The 500 billion won is merely the maximum investment limit set; it does not mean the full amount will be invested.” If KAI’s stock price rises in the future, the number of shares acquirable for the same amount could decrease, raising the possibility that the group may adjust its stake to below 14.99% to avoid triggering a business combination filing.<\/p>\n
The prevailing market view is that Hanwha Group is weighing the right timing to purchase a portion of the Export-Import Bank of Korea’s stake at a management control premium while maintaining its own stake at 14.99%. This is why analysts suggest Hanwha has effectively “made up its mind” to acquire KAI.<\/p>\n
However, significant hurdles remain before the takeover scenario can materialize. KAI’s labor union is strongly opposing Hanwha’s attempts to participate in management. A union representative stated, “If the takeover attempt through stake expansion materializes, we will respond by mobilizing all possible means to protect KAI’s independence and industrial base.”<\/p>\n
Legal regulations are also a variable. Under the Defense Acquisition Program Act, any entity seeking to substantially acquire managerial control of a defense contractor must obtain prior approval from South Korea’s Minister of Trade, Industry and Energy. The government is also inevitably conscious of the controversy surrounding a potential “fire sale” of KAI, a national strategic asset. Critics point out that Hanwha Group faces many mountains to climb \u2014 including the Fair Trade Commission review, ministry approval, and union opposition \u2014 before it can exercise actual management control beyond its second-largest shareholder status.<\/p>\n","protected":false},"excerpt":{"rendered":"Hanwha Group is once again accelerating its efforts to expand its stake in Korea Aerospace Industries (KAI), adding…\n","protected":false},"author":2,"featured_media":80750,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[30],"tags":[43428,8679,355,277,354,548,21968,675,40829,550,42969],"class_list":["post-80749","post","type-post","status-publish","format-standard","has-post-thumbnail","category-hanwha","tag-active-electronically-scanned-array-aesa-radar","tag-export-import-bank-of-korea","tag-hanwha","tag-hanwha-aerospace","tag-hanwha-group","tag-hanwha-systems","tag-industry-and-energy","tag-kf-21","tag-korea-aerospace-industries-kai","tag-korea-fair-trade-commission","tag-south-koreas-ministry-of-trade"],"_links":{"self":[{"href":"https:\/\/www.europesays.com\/korea\/wp-json\/wp\/v2\/posts\/80749","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.europesays.com\/korea\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.europesays.com\/korea\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/korea\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/korea\/wp-json\/wp\/v2\/comments?post=80749"}],"version-history":[{"count":0,"href":"https:\/\/www.europesays.com\/korea\/wp-json\/wp\/v2\/posts\/80749\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/korea\/wp-json\/wp\/v2\/media\/80750"}],"wp:attachment":[{"href":"https:\/\/www.europesays.com\/korea\/wp-json\/wp\/v2\/media?parent=80749"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.europesays.com\/korea\/wp-json\/wp\/v2\/categories?post=80749"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.europesays.com\/korea\/wp-json\/wp\/v2\/tags?post=80749"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}