Hanwha Systems IPO to spur management succession
This combined photo shows the three sons of Hanwha Group Chairman Kim Seung-youn. From left, eldest to youngest, are Dong-kwan, Dong-won and Dong-seon. Korea Times file
By Nam Hyun-woo
Hanwha Group Chairman Kim Seung-youn
The scheduled initial public offering (IPO) of Hanwha Systems will accelerate Hanwha Group's management succession from Chairman Kim Seung-youn to his three sons, industry officials said Monday.
The defense company's listing on Korea's main bourse will help increase the value of H-Solution, another Hanwha Group company fully owned by the three sons, helping them tighten their grip on Hanwha Corp., the group's de facto holding firm, they said.
According to Hanwha Systems, it will make its KOSPI debut on Wednesday. Its initial price was set at 12,250 won a share, which makes its market cap in excess of 1.35 trillion won ($1.16 billion).
Along with its market value, the company's IPO drew greater attention because of its No. 3 stakeholder, H-Solution, with 14.48 percent. H-Solution is owned by the three sons, with the eldest, Dong-kwan, having 50 percent and second-eldest Dong-won and youngest Dong-seon each with 25 percent.
“Hanwha Group heirs have relatively small stakes in Hanwha Corp., so they have to increase their shares in the de facto holding firm for stable management succession,” a conglomerate official said, asking not to be named. “Thus, the increased value of H-Solution will help the sons increase their Hanwha Corp. shares by either purchasing or exchanging stakes.”
According to Hanwha Corp.'s regulatory filing, Dong-kwan has a 4.44 percent stake in the company, the largest among the three sons. Dong-won and Dong-sun each have 1.67 percent. Adding a 4.2 percent stake held by H-Solution, they have 11.98 percent of Hanwha Corp., far less than Chairman Kim's 22.65 percent.
If the value of H-Solution goes up, it will have more of an advantage in a potential stake exchange with Hanwha Corp. In the case of purchasing Hanwha Corp. stakes, the Hanwha Systems' IPO will provide buying power for H-Solution, because its 14.5 percent stake in Hanwha Systems is worth at least 200 billion won.
Casting a rosy outlook for H-Solution is the IPO of Hanwha General Chemical, expected next year. Hanwha General Chemical is a "granddaughter company" of H-Solution.
Hanwha General Chemical's IPO is valued at 5 trillion won and this will benefit its largest stakeholder Hanwha Energy, which has 39.2 percent and H-Solution, which fully owns Hanwha Energy.
Along with the management succession, Hanwha Systems' IPO will expedite the group's effort to improve its shareholding structure.
Though Hanwha Corp. is playing the role of the group's holding firm, it does not have tight control on all Hanwha units, due to the existence of H-Solution and cross-shareholding structures. Since 2017, the group has been making efforts to improve this structure.
“It is natural to expect that H-Solution will increase its stakes in Hanwha Corp. and eventually merge with it,” KTB Investment & Securities analyst Haney Kim said. “H-Solution's increased shareholding in Hanwha Corp. will also help a smooth approval of the two firms' merger from shareholders.”
The management succession plan is expected to pick up momentum after the end of an 18-month lock-up period preventing H-Solution from selling Hanwha Systems shares.