Hanwha to Complete Governance Structure Transition by March Next Year

Hanwha Aerospace Defense Division Integration
Hanwha Co., Global, Construction, Momentum Restructuring
Daewoo Shipbuilding & Marine Engineering Acquisition Expected in March Next Year

Changes in Shareholding Structure Before and After Hanwha Group's Corporate Governance Restructuring

[Asia Economy Reporter Oh Hyung-gil] Among the top 10 conglomerates, Hanwha Group, which was the first to complete its regular personnel reshuffle, is in the midst of restructuring its governance ahead of the year-end. The overall organizational chart of the group is expected to be finalized in the first quarter of next year, when the acquisition of Daewoo Shipbuilding & Marine Engineering (DSME) is expected to be completed.

This governance restructuring aims to enhance competitiveness in key growth engines such as defense and overseas businesses and to improve management efficiency. In particular, the reorganization of manufacturing affiliates centered on third-generation Vice Chairman Kim Dong-kwan is the core focus.

According to industry sources on the 2nd, Hanwha Corporation physically split its defense division on the same day. Hanwha Aerospace, which absorbed its subsidiary Hanwha Defense the day before, will acquire this defense division around the 30th of this month.

Hanwha Aerospace has already sold all non-core affiliates engaged in businesses other than defense. Hanwha Power Systems was sold to Hanwha Impact at the end of August. Hanwha Precision Machinery was also sold to Hanwha Corporation and absorbed into the Momentum division, which produces automation machines.

The group’s defense business will complete a unified structure running from Hanwha Corporation to Hanwha Aerospace, Hanwha Systems, and Hanwha Defense. Hanwha Aerospace plans to become one of the global top 10 defense companies by 2030 through integration of its divisions.

Hanwha Corporation merged with Hanwha Construction the day before and was reborn as a construction division. Accordingly, Hanwha Corporation’s existing three major business structures?Global, Defense, and Momentum?have transformed into Global, Construction, and Momentum + Precision Machinery.

[Image source=Yonhap News]

If the primary internal restructuring within the group is completed in January next year with Hanwha Corporation’s acquisition of Hanwha Precision Machinery, the second phase will be the acquisition of Daewoo Shipbuilding & Marine Engineering.

The acquisition of DSME, which is undergoing due diligence for up to six weeks until early December, is expected to conclude next year. Considering the time required for signing the final contract and completing the corporate merger review after due diligence, the final acquisition of DSME is expected to take place no earlier than mid-March.

On September 26, DSME signed a conditional investment agreement (MOU) with Hanwha Group, under which Hanwha will participate in a paid-in capital increase worth 2 trillion KRW to acquire a 49.3% stake and management rights. Hanwha affiliates participating in the capital increase include Hanwha Aerospace (1 trillion KRW), Hanwha Systems (500 billion KRW), Hanwha Impact Partners (400 billion KRW), and three subsidiaries of Hanwha Energy (100 billion KRW).

Regarding the funding for the acquisition, Hanwha Aerospace stated, "There is no change to our previous position that securing 1 trillion KRW is fully feasible internally, as export contracts related to Hanwha Defense continue."

The business community expects that the Hanwha Group’s business structure transformation will be finalized smoothly upon the successful acquisition of DSME next year. The succession structure among Chairman Kim Seung-yeon and his three sons will also become clearer.

It is anticipated that Vice Chairman Kim Dong-kwan, who leads Hanwha Solutions and Hanwha Aerospace, will oversee the manufacturing sector; Kim Dong-won, Vice Chairman of Hanwha Life Insurance, will be responsible for the financial sector centered on Hanwha Life; and Kim Dong-sun, Executive Director of Hanwha Hotels & Resorts, will handle the distribution and leisure sectors, including the Galleria division to be spun off from Hanwha Solutions in March next year.

A Hanwha Group official said, "The business restructuring will enhance business expertise and management efficiency in each field," but added, "It is not yet the stage to discuss succession."