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.
Heir's US citizenship puts Poongsan in dilemma over munitions business
Poongsan's military ammunitions / Captured from Poongsan's website
By Park Jae-hyuk
Company neither confirms nor denies sale of defense unit
Poongsan is remaining ambiguous about rumors that it may sell its profitable munitions business so the chairman’s son, who holds U.S. citizenship, can take over management without violating Korean laws that restrict foreign nationals from running defense firms.
Poongsan produces 155-millimeter artillery shells used in the K9 self-propelled howitzer, which has been exported to multiple countries, including Poland and Romania.
According to industry sources and media reports, the copper products and munitions manufacturer emailed employees Thursday to reassure them that no decision had been made.
Poongsan Vice Chairman Park Woo-dong, known as Chairman Ryu Jin’s right-hand man, reportedly told employees in the email that the rumors seemed to have been fueled by heightened attention in the financial market to the company’s possible restructuring plans.
On Wednesday, local news outlets reported that Poongsan had hired U.S. investment bank Lazard, law firm Kim & Chang and accounting firm Samil PwC as advisers for the possible sale of its munitions business to a domestic defense company for about 1.5 trillion won ($1 billion).
Royce Ryu, the chairman’s 32-year-old son, currently serves as an executive at PMX Industries, Poongsan’s U.S. subsidiary that supplies copper and copper alloys.
Under the Defense Acquisition Program Act and the Foreign Investments Promotion Act, foreign nationals seeking to acquire shares in defense firms or hold executive positions in such companies must consult with the defense minister and obtain approval from the industry minister.
In response, Poongsan said in a regulatory filing that “nothing has been decided,” though the company is reviewing structural reforms to enhance corporate and shareholder value. Its parent company, Poongsan Holdings, denied speculation that it planned to sell its stake in Poongsan.
The ambiguous statements have led investors to believe Poongsan may first spin off its munitions unit before selling it.
“Because the eldest son of Poongsan’s largest shareholder holds U.S. citizenship, it is difficult for him to inherit managerial rights,” KB Securities analyst Choi Yong-hyun said. “From the largest shareholder’s perspective, selling the munitions business at a high price during a defense industry boom makes sense.”
Choi added that Poongsan’s dominant position in Korea’s munitions market could attract several potential buyers.
“Domestic defense firms with strong cash reserves are expected to consider acquiring it,” he said.
In 2022, Poongsan attempted to establish a wholly owned subsidiary dedicated to its munitions business, prompting speculation that it planned to sell the division after the spin-off. The plan was later scrapped following strong opposition from minority shareholders concerned about a possible decline in share value.