Hanwha to split into 2 holding firms through spin-off

Hanwha Group Chairman Kim Seung-youn, third from left, poses with his three sons during a ceremony for the 100th anniversary of the birth of his father and Hanwha Group founder Kim Chong-hee at 63 Convention Center in Seoul in this November 2022 photo. From left are Hanwha Galleria Vice President Dong-seon, Hanwha Life Insurance President Dong-won, the chairman and Hanwha Group Vice Chairman Dong-kwan. Courtesy of Hanwha Group

Hanwha Corp., the holding firm of Hanwha Group, will spin off its machinery and services businesses into a separate holding company to strengthen expertise across its business lines, the conglomerate said Wednesday.

It will also cancel treasury shares worth 456.2 billion won ($308.7 million) to improve shareholder value.

The Hanwha Corp. board approved the plan during a meeting Wednesday. The plan will be voted on during an extraordinary shareholder meeting in June, and the spin-off is expected to be completed by July.

According to the plan, the new holding firm will be named Hanwha Machinery & Service Holdings, controlling the group's tech and life service affiliates. Tech affiliates include Hanwha Vision, Hanwha Momentum, Hanwha Semitech and Hanwha Robotics, while life service firms include Hanwha Galleria, Hanwha Hotels & Resorts and Ourhome.

Hanwha Corp. will maintain its control on its defense and heavy industry units, including Hanwha Aerospace, Hanwha Ocean and Hanwha Systems. Financial affiliates such as Hanwha Life Insurance, Hanwha General Insurance and Hanwha Investment & Securities will also stay under Hanwha Corp.

The split ratio was set at 76.3 percent for Hanwha Corp. and 23.7 percent for the new entity. Existing shareholders will receive shares in both companies based on this ratio.

Hanwha said the spin-off is aimed at addressing the low market valuation of its affiliates stemming from their conglomerate structure.

While defense, shipbuilding, energy and financial businesses require long-term growth strategies and investment plans, machinery and service businesses require agile strategies and prompt market response.

“Hanwha Group has been facing difficulties in matching the speed and direction of strategies among business segments and managing the group’s portfolio balance,” Hanwha Corp. said in a statement. “The spin-off will address these issues so that each company can independently set strategies catered to market conditions, enabling faster decision-making process and stronger execution to enhance competitiveness.”

The companies being transferred to the new holding company are overseen by Hanwha Chairman Kim Seung-youn's third son, Hanwha Galleria Vice President Dong-seon. The eldest son, Hanwha Vice Chairman Dong-kwan, is in charge of defense and heavy industries, and the second son, Hanwha Life Insurance President Dong-won, is in charge of financial businesses.

By separating the businesses overseen by the chairman’s third son, the group appears to be laying the groundwork for a future succession process in a way that could help avoid potential conflicts between brothers.

Along with the spin-off, the Hanwha Corp. board decided to cancel 4.45 million treasury shares to further improve shareholder value. This accounts for 5.9 percent of the company’s common shares, and the largest cancellation of treasury stocks during the Lee Jae Myung administration.

The company will also raise its dividend per share to 1,000 won from 800 won last year, saying it will consider further dividend increases depending on the growth of its subsidiaries.