Getting Bigger
Hanwha Group Chairman Kim Seung-youn has sent the news of victory once again. As Hanwha Group is about to take over Doosan Defense Systems & Technology (DST), the company is one step closer to fulfilling its goal to expand the defense product lineup, including armored vehicles and air defense guns, and become one of the top 10 global powerhouses in the defense industry.
Doosan Group and Doosan DST’s sales manager Credit Suisse selected Hanwha Techwin, a weapons technology affiliate of Hanwha Group, as the preferred bidder for Doosan DST on March 30. Hanwha Techwin was said to have offered around 695 billion won (US$605.93 million) for a 100 percent stake in Doosan DST.
With the takeover of Doosan DST, Hanwha, which aims to become a global defense industry leader, will raise the competitiveness by strengthening its product portfolio.
Hanwha Group currently has three defense units - Hanwha Corporation's Defense Division, Hanwha Thales and Hanwha Techwin. The latter two companies were acquired from Samsung in Nov. 2014. Hanwha Corp. produces the Chunmoo multiple launch rocket system and guided missiles, while Hanwha Techwin produces the K-9 thunder self-propelled artillery, K10 ammunition re-supply vehicle and jet engines. Hanwha Thales is specialized in command and control systems, tactical information communications systems and ground surveillance radars. In addition, the major products of Doosan DST are the K21 infantry fighting vehicle, Bi Ho, a 30mm self-propelled anti-aircraft gun system, and navigation equipment. Accordingly, Hanwha Group will be truly turned into a total defense company.
In particular, its vertical integration ranging from ammunition to weapon, electronic and surveillance system components and complete self-propelled guns will be strengthened further, creating a synergy effect. Also, it will raise business power based on various ground equipment.
With the acquisition of Doosan DST, Hanwha Group has also grown in size. In terms of sales in the defense sector alone, the figure of Hanwha Corp. stood at 1.1 trillion won (US$959.02 million), Hanwha Techwin at 1.2 trillion won (US$1.05 billion), Hanwha Thales at 700 billion won (US$610.29 million) and Doosan DST at 700 billion won (US$610.29 million). The total sales of Hanwha’s defense arms will increase from 3 trillion won (US$2.62 billion) to 3.7 trillion won (US$3.23 billion), including Doosan DST. Considering Hanwha Techwin’s sales growth, sales estimates for this year exceed 4 trillion won (US$3.49 billion).
Sales of top 10 global defense firms are around 10 trillion won (US$8.72 billion). Hanwha Group has achieved half of the sales target by adding Doosan DST, and it will expand its defense business further in the future. During the announcement of being chosen as the preferred bidder on the day, Hanwha Techwin CEO Shin Hyun-woo said, “The company will strengthen the business competitiveness and improve efficiency in each sector so it can break into global markets. The takeover is part of Hanwha Techwin's long-term strategy to jump into a global leading defense company.” Consequently, the idea that Hanwha Group can also take over the Korea Aerospace Industries (KAI) continues to hold water. This is because the vertical integration will be set up when the KAI, which develops fighter jets, and Hanwha Techwin, which produces fighter jet engines, are merged. The KAI’s sales of 2.9 trillion won (US$2.53 billion) last year and its fighter jet business unit will be a strong complement to Hanwha seeking to become one of the top 10 global companies in the defense industry. However, the group is remaining silent about its intention to acquire the KAI.