Kim Hyun-bin began his journalism career at Arirang TV from 2012 to 2017, specializing in defense, foreign affairs and the economy. In 2018, he joined The Korea Times, covering society and business, and is currently responsible for embassy affairs.
Hanwha considers pursuing holding company structure
Hanwha Chairman Kim Seung-youn, left, and Hanwha Solutions President Kim Dong-kwan / Korea Times file
By Kim Hyun-bin
By Kim Hyun-bin
Hanwha Group has been focusing on better solidifying the passing of managerial control from Hanwha Group Chairman Kim Seung-youn to his eldest son Kim Dong-kwan, president of Hanwha Solutions.
The recent merger of Hanwha Energy and H-Solutions is believed to set the foundation for the managerial succession, industry watchers said, Monday.
Currently, Hanwha Group does not have a holding company system, with Hanwha Corporation and H-Solution taking up the central role. Kim Dong-kwan holds 50 percent of H-Solution's shares and his two younger brothers each hold 25 percent. H-Solution is widely viewed as the key to the managerial succession of Hanwha Group.
H-Solution is the second-largest holder of intermediary holding company Hanwha Corp., with 5.19 percent of its shares, while the largest shareholder is Kim Seung-youn with 22.65 percent. H-Solution has been working to raise its corporate value which would increase the managerial power for the chairman's three sons, while the merger of H-Solution and Hanwha Energy is likely to strengthen their management structure.
“Through the merger, Hanwha Energy will be able to ease any conflicts in management structure and simplify decision-making procedures to reduce costs and enhance management and transparency,” an official at Hanwha Group said.
Chairman Kim seems to see limitations in terms of growth for H-Solution and is said to have reviewed measures to merge the company with Hanwha Corp., but since H-Solution is a non-listed company, a merger could negatively affect Hanwha Corp.'s stock prices. As an alternative, the eldery Kim turned to the merger with Hanwha Energy which has yet to be listed.
Hanwha Group headquarters
A merger of H-Solution and Hanwha Corp. could spark judicial risks as seen in the case of Samsung Electronics Vice Chairman Lee Jae-yong, who went to prison over the 2015 merger of Samsung C&T, the de facto holding company of the group, with Cheil Industries, which gave him greater control of the conglomerate from his father, the late Chairman Lee Kun-hee. While Lee was released from prison on parole last week, the Samsung leader still faces charges including breach of duty and capital market law violations.
Hanwha Energy is in charge of future energy departments such as solar power and hydrogen, and if the company aims to conduct an initial public offering (IPO), the three sons' share value could be multiplied. Industry watchers believe they could obtain the necessary funds for the succession from their father through selling off affiliates under Hanwha Energy, once the time comes.
“The recent merger decision just transferred managerial power from H-Solution to Hanwha Energy,” an industry official said.
A merger of Hanwha Energy and H-Solution presents a possibility for Hanwha Group to set up a holding company for a smooth succession.
Expectations are a two-track holding company structure might be in the works, with the merged Hanwha Energy and H-Solution taking the lead on the group's key investment decisions, while the current intermediary holding company will be in charge of Hanwha Corp. and other energy businesses.
Kim Dong-kwan was promoted to his current position last October, and with the recent restructuring decision will be able to lead the diverse sectors of the conglomerate, including distribution and construction, allowing him to strengthen his position for a possible succession in the future.
Some industry watchers believe the recent merger could form a holding company for Hanwha Group after the eldest son steps into higher roles within the conglomerate.