Hanwha Aerospace Decides to Reduce Scale of Private Placement

Hanwha Aerospace has decided to significantly reduce the scale of its previously announced private placement from 3.6 trillion won to 2.3 trillion won.

On the 8th, Hanwha Aerospace held a board meeting and corrected its public disclosure regarding this matter.

In terms of funding purposes, the amount allocated for acquiring securities from other corporations decreased from 2.4 trillion won to 1.6 trillion won, while the amount for facility funds dropped from 1.2 trillion won to 700 billion won.

The issuance price of new shares has also been discounted by 15%, from the previous 605,000 won to 539,000 won, and the subscription date has been postponed from June 4 to June 5.

This reduction in the scale of the private placement is interpreted as a measure to address suspicions that the funds from the private placement could be used in the process of succession of management rights by major shareholders and to alleviate the concerns of shareholders. Notably, it is planned that the reduced amount of 1.3 trillion won will be secured through a third-party private placement involving three companies: Hanwha Energy, Hanwha Impact Partners, and Hanwha Energy Singapore.

A strategic decision to resolve the management rights succession controversy

Immediately following the public announcement, Hanwha Aerospace issued a press release stating that it is considering participation in a third-party allocation private placement of 1.3 trillion won by three companies, including Hanwha Energy.

If this method is confirmed, Hanwha Energy, whose major shareholders are the three sons of Kim Seung-yeon, the chairman of Hanwha Group, will participate in the third-party allocation private placement of Hanwha Aerospace without any discount.

The company explained this by saying, "The major shareholder of Hanwha Energy sacrifices, and the minority shareholders of Hanwha Aerospace benefit." This effectively returns the 1.3 trillion won that Hanwha Aerospace paid to Hanwha Energy as the sale proceeds of Hanwha Ocean shares back to Hanwha Aerospace.

Lee Jae-kyu, CEO of Hanwha Energy, stated, "The purpose of procuring 1.3 trillion won was related to improving financial structure and securing investment resources, which is unrelated to succession, and some of the funds have actually been used for loan repayments and investment." He added, "We are reviewing participation in Hanwha Aerospace's third-party private placement to avoid unnecessary succession controversies."

Son Jae-il, CEO of Hanwha Aerospace, also emphasized the necessity of the third-party allocation private placement, explaining that it is a way to alleviate the burden on minority shareholders participating in the shareholder allocation private placement while reducing the side effects of dilution of existing shareholders' equity and securing the necessary funds of 3.5 trillion won.

Last month, when announcing the private placement plan, Hanwha Aerospace stated that it needed investment funds in response to changes in the global security landscape and the intensification of defense competition.

This action appears to be a strategic decision to resolve the management rights succession controversy while maintaining the total scale of the private placement.

Meanwhile, in the defense industry, major defense companies are continuing large-scale investments due to recent changes in the global security environment.

Hanwha Aerospace's funding procurement is expected to be an important stepping stone to strengthen its competitiveness in the global defense market.

Image source: Photo=Insight, Hanwha Aerospace