Hanwha heir tightens grip on group via mergers

By Kim Hyun-bin

Hanwha Group Chairman Kim Seung-youn's eldest son, Hanwha Solutions President Kim Dong-kwan, has been working to tighten his grip over the conglomerate through mergers in preparation to succeed his father.

Department store chain Hanwha Galleria and Hanwha City Development are set to be merged with Hanwha Solutions next, a move interpreted by many insiders as an articulated plan to expand its business and improve management efficiency as well as bolstering Dong-kwan's management range.

Hanwha Solutions President Kim Dong-kwan

Hanwha officials are keeping a close eye on Kim's latest decisions as it gives more power to Hanwha Solutions as well as Kim's management capabilities within the group.

The recent merger decision will add two more fields of management ― retail and development ― to Hanwha Solutions' existing four-pillar business structure ― chemicals, photovoltaic solar cells, advanced materials and strategy.

“Hanwha Solutions owns 100 percent of the affiliates. The mergers are being held to efficiently distribute resources and simplify the decision-making process to maximize management efficiency,” Hanwha Solutions said.

Hanwha Group seeks to create synergy with the merger of Hanwha Solutions and Hanwha City Development to utilize its renewable energy sources such as solar power and hydrogen into future city development plans, which will further strengthen Hanwha Solutions' role within the group.

“Hanwha Solutions will be able to use its renewable energy solar and hydrogen sector and link it with retail and urban development to create new business opportunities, for example new eco-friendly smart town developments,” a Hanwha Group official said.

The merger also could be part of the big picture for Hanwha Group Chairman Kim Seung-youn, laying out the framework for his eldest son to succeed him as the merger expands Kim Dong-kwan's range of operation.

Kim was promoted to his current position in October, and with the recent restructuring decision he will be able to lead diverse sectors of the conglomerate including distribution and construction, allowing him to strengthen his position for a possible succession in the future.

Kim has served as head of Hanwha Solutions' strategy department, a key position in excavating new growth engines and setting medium- to long-term strategies before being promoted to president of the company.

Some industry watchers believe Hanwha Solutions could later become the holdings company for Hanwha Group after Kim Dong-kwan takes over higher roles within the conglomerate.

“To become a holding company, it needs to secure 50 percent of the affiliate's stakes, which realistically is impossible for Hanwha Solutions at the time being. Also there are no practical benefits from the move, as a holding company will be slapped with limitations on debt ratio,” an industry official familiar with the matter said.

Currently, Hanwha Group does not have a holding company, with Hanwha Corporation and H-Solution taking up the role. The eldest Kim Dong-kwan has 50 percent of H-Solution's shares and the other two sons take up 25 percent each. H-Solution is widely viewed as the key to the managerial succession of Hanwha Group.

Industry officials expect Hanwha Corporation to merge with H-Solution so the three sons could become leading shareholders of the major affiliate and to smooth out managerial succession procedures.