Park Jae-hyuk is a seasoned journalist who has provided comprehensive coverage of South Korea's corporate dynamics, economic policies, industry challenges and the global positioning of Korean companies. Based on the articles he has written since joining The Korea Times in 2016, his investigative approach has helped readers understand corporate governance, economic trends and business strategies shaping South Korea’s economy.
Attack on chairman's family prompts Hanwha to revise rights offering plan
An Byung-chul, head of Hanwha Aerospace’s strategy office, speaks during a press conference at Hanwha Group's headquarters in Seoul, Tuesday. Courtesy of Hanwha Systems
By Park Jae-hyuk
Conglomerate attributes public criticism to 'misunderstanding'
Hanwha Aerospace announced Tuesday that it will reduce the size of its planned rights offering to 2.3 trillion won ($1.6 billion), down from 3.6 trillion won.
The remaining 1.3 trillion won will be raised through a third-party allotment, with Hanwha Group affiliates expected to purchase the new shares.
The decision follows mounting political and market criticism that the record-breaking rights offering in the domestic stock market may have been designed to help the three sons of Hanwha Group Chairman Kim Seung-youn inherit control of the nation’s seventh-largest conglomerate.
“Even if our plan made business sense, we chose to revise it because it did not gain support from our shareholders, civic groups, political circles or financial regulators,” An Byung-chul, head of Hanwha Aerospace’s strategy office, said during a press conference.
The company stressed that its major shareholders would shoulder more of the burden of protecting minority shareholders.
According to its regulatory filing, minority shareholders will be able to buy Hanwha Aerospace’s newly issued shares at 539,000 won per share. In contrast, the group’s affiliates will pay the original offering price of 605,000 won.
Hanwha Aerospace said the affiliates will decide whether to participate in the capital increase after April 21.
The company faced backlash last month for its surprise announcement of a 3.6 trillion won share issuance at a price nearly 15 percent below its then-market value.
The closing prices of Hanwha Aerospace and Hanwha Corp. shares are seen on an electronic board at Yonhap Infomax in Seoul, March 21, a day after Hanwha Aerospace announced its decision to issue 3.6 trillion won ($2.5 billion) worth of new shares. Yonhap
While Hanwha Group said the funds were needed for strategic investments, the public response focused on the chairman’s family. A week before the announcement, Hanwha Energy — fully controlled by his three sons — received 1.3 trillion won from Hanwha Aerospace in exchange for its stake in Hanwha Ocean.
In response, Hanwha’s management repurchased treasury shares of the defense firm.
The group also announced that Chairman Kim plans to transfer half of his controlling stake in Hanwha Corp., the de facto holding company, to his sons, effectively making them the largest collective shareholder.
However, the Financial Supervisory Service (FSS) requested that Hanwha Aerospace revise its filing, stating that shareholders deserve a clear explanation of the governance restructuring.
Rep. Lee Jae-myung, chairman of the Democratic Party of Korea and the current frontrunner in the presidential race following the impeachment of former President Yoon Suk Yeol, also criticized Hanwha while commenting on the government’s veto of the Commercial Act revision.
Park Sang-hyun, an analyst at Singapore-based market research firm SmartKarma, said Hanwha Aerospace’s initial plan was “a bit of a miss.”
“It’s pretty clear Hanwha was looking to leverage the Aerospace rights offering for corporate succession, but the market reaction was more negative than they anticipated,” he said.
“Then, with the FSS tightening their grip due to some changes in their regulatory playbook, Hanwha had to pivot fast.”