Defense Business Unification
There is a rumor that Hanwha Group will reorganize its defense businesses when the new government takes office. The group has said that there will be no defense business reshuffle in the near future, but it is expected to accelerate the reorganization of its defense business units under the next administration.
According to industry sources on May 8, the rumor that Hanwha Group will consolidate its defense units – Hanwha Corporation’s defense manufacturing unit, Hanwha Dynamics, Hanwha Defense and Hanwha Systems – is recently spreading in the securities industry. The rumor has emerged after Hanwha Techwin announced to spin off its defense businesses.
Hanwha Techwin will physically spin off its defense, including self-propelled artillery and ammunition car, energy equipment, such as compressor, generator and gas turbine, and industrial equipment, like chip mounter, business sectors on July 1. After the spin-off, Hanwha Techwin, which is the surviving entity, will focus on its aeroengine, video surveillance cameras and systems like CCTV, and industrial robots businesses.
When the spin-off plan is approved at an extraordinary general meeting to be held on June 15, Hanwha’s defense unit will be merged with Hanwha Dynamics, a newly established defense firm, while its energy equipment and industrial equipment units will be launched as Hanwha Power System and Hanwha Precision Machine, respectively.
Hanwha Techwin is considering the reorganization in order to stabilize the business soon after the spin-off. In the process of the spin-off, the 100 percent stake in Hanwha Defense owned by Hanwha Techwin will be transferred to Hanwha Dynamics. However, the 100 percent stake in Hanwha Systems will be still owned by Hanwha Techwin. It means that the governance structure of the group’s defense subsidiaries will be reorganized from Hanwha Corporation to Hanwha Techwin and then to Hanwha Dynamics/Hanwha System and finally to Hanwha Defense.
Hanwha Dynamics and Hanwha Defense, which have focused on producing land maneuverable weapon systems, such as self-propelled artillery and ammunition carrier and armored vehicle, will have a 100 percent equity relationship. This is the pre-emptive measure to merge the two subsidiaries in the medium and long term.
In this regard, an official from Hanwha Group said, “We don’t consider the merger of our defense business units at all for now.”