Focusing on Internal Stabilization
Hanwha Techwin, which was a strong candidate to take over Korea Aerospace Industries (KAI), seems to be pulling out of the project. Industry sources think that the company has decided to put business stabilization first before a large M&A.
Hanwha Techwin announced on Jan. 5 that it will sell 4.87 million shares worth 375.76 billion won (US$315.9 million) in KAI in a block trade. Accordingly, the company will hold only a 5 percent share in KAI after selling half of its 10 percent.
The decision has overturned the market prediction that Hanwha is highly likely to acquire KAI. The ownership of KAI had been shared by Korea Development Bank (KDB) with 26.75 percent, Hanwha Techwin with 10 percent, Hyundai Motor with 10 percent and DIP Holdings with 5 percent. After KDB announced the plan to sell its shares in KAI, Hanwha Techwin had been considered a leading candidate for the takeover, along with Korean Air and Hyundai Heavy Industries. This is because the company will be able to secure the management rights of KAI when it buys an additional 5 percent of shares, and it will have great synergy effects through the takeover of KAI as a defense industry company.
As Hanwha Techwin sold all shares of its subsidiary Hanhwa General Chemical last month, securing 440 billion won (US$369.9 million), some said that the company could begin the procedure to take over KAI.
Industry watchers believe that Hanwha Techwin has lost interest in KAI through the sell-off. A spokesperson from Hanwha Techwin said regarding this, “We sold the shares in a bid to secure an investment source to become a global aviation company in the defense industry.” The company is planning to push ahead with M&As with an engine component producer with the funds.