Hanwha to Split into Defense-Energy and Tech-Lifestyle Entities [KFT Topic]

[Korea Financial Times, Shin Haeju] Hanwha Corporation is pursuing a spin-off split into a surviving entity covering defense, shipbuilding and offshore, energy, and finance, and a newly established entity encompassing tech and lifestyle divisions. The company explains this strategic decision aims to establish management strategies optimized for each business group's characteristics and build a swift decision-making system to simultaneously elevate corporate and shareholder value.

Defense & Finance 'Survive' vs Tech & Lifestyle 'Newly Established'

Upon completion of the spin-off, tech affiliates including Hanwha Vision, Hanwha Momentum, Hanwha Semitech, and Hanwha Robotics, along with lifestyle affiliates such as Hanwha Galleria, Hanwha Hotels & Resorts, and Ourhome, will be integrated under the newly established holding company 'Hanwha Machinery & Service Holdings.'

Meanwhile, defense, shipbuilding, energy, and finance affiliates including Hanwha Aerospace, Hanwha Ocean, Hanwha Solutions, and Hanwha Life will remain under the surviving entity, Hanwha Corporation.
The split ratio based on net asset book value is 76.3% for the surviving entity and 23.7% for the newly established entity, with existing shareholders receiving shares in both companies according to their ownership stakes.


Hanwha Corporation's board of directors approved this spin-off plan on the morning of the 14th. The company explained that this decision was made with the full support of directors following multiple preliminary briefing sessions and in-depth review of materials. The spin-off is scheduled to be finalized in July following an extraordinary shareholders' meeting in June.

Directly Targeting Resolution of 'Conglomerate Discount'

Hanwha Corporation expects this split to mark a turning point in resolving the 'conglomerate discount' that has been a chronic cause of corporate undervaluation.

The assessment is that it has resolved strategic misalignment and capital allocation inefficiency issues caused by the mixture of different business groups, and established a foundation for each company to execute independent management strategies aligned with market conditions.
The company particularly explains that, considering the successful case of Hanwha Aerospace whose combined market capitalization increased 35% after spinning off non-defense divisions, and precedents of major companies such as Samsung Biologics and SK D&D, this split is also expected to elicit positive market revaluation.

KRW 456.2 Billion Treasury Stock Cancellation and 25% Dividend Increase

The company also unveiled bold shareholder return measures to enhance shareholder value. Hanwha Corporation will cancel 4.45 million common shares (5.9% of total common shares), excluding employee performance compensation (RSU) portions.

This amounts to approximately KRW 456.2 billion based on the closing price on the 13th, the largest scale since the current government's inauguration. Through this, the company plans to fundamentally block the possibility of 'treasury stock magic' concerns raised by some market participants and strengthen governance transparency.


Dividend policy will also be strengthened. Minimum dividend per share (DPS) will be increased 25% from the existing KRW 800 to KRW 1,000 to enhance predictability. The company decided to purchase and cancel all remaining 199,033 old-type preferred shares to eliminate holding company discount factors.

Preempting the Future with 'Physical AI'... Specialization of Core Businesses

Hanwha Machinery & Service Holdings, to be newly established through this split, plans to transform into a 'Physical AI' solution company by maximizing synergies between tech and lifestyle divisions.

The company selected three core areas: ▲'Smart F&B' combining artificial intelligence (AI) and robotics ▲'Smart Hospitality' featuring advanced customer service systems ▲'Smart Logistics' with intelligent distribution systems, and plans to maximize corporate value by making timely investments for market preemption.

Hanwha Corporation, which will become the surviving entity covering defense, shipbuilding and offshore, energy, and finance, also plans to maximize business specialization and further strengthen market competitiveness through this spin-off.

Considering the high policy sensitivity of these business groups, the company will proactively respond to various business risks and enhance corporate value by establishing business strategies and investment plans from a long-term perspective.

Hanwha Corporation will also advance its governance structure in conjunction with this split. The company plans to solidify its transparent management system by establishing an independent audit support department, operating CEO succession policies, and regularly announcing dividend policies, while expanding market and investor communication by strengthening domestic and international IR activities.

Hanwha Corporation stated, "With this announcement of the corporate value enhancement plan including the spin-off, we plan to set revenue growth enhancement and expanded shareholder returns as key management indicators for corporate value enhancement and focus on strengthening trust with shareholders and investors."

Shin Haeju (hjs0509@fntimes.com)