Hanwha Group, South Korea’s seventh-biggest conglomerate, aims to become a global defense company by maximizing synergies between Daewoo Shipbuilding & Marine Engineering Co. and its existing units after receiving the final hurdle to buy the world’s fourth-largest shipbuilder and fulfilling its ambition that started in 2008.

South Korea’s antitrust regulator said on Thursday approved Hanwha Group’s acquisition of a controlling 49.3 percent stake in Daewoo Shipbuilding, on condition that the conglomerate take corrective measures to prevent potential anti-competition practices for defense-related orders.

Under the Fair Trade Commission’s directives, Hanwha must not discriminate against other rivals in the pricing of equipment for military vessels, unfairly refuse to provide information about equipment to rival companies and provide rival trade secrets to Hanwha affiliates. The conditional approval appears to have come in consideration that Hanwha is a monopoly producer of the combat management system, which serves as the brain of naval vessels.

“The FTC’s corrective measures have placed considerable restrictions on our business activities,” a Hanwha official said. “We, however, decided to accept the authorities‘ decision from a broader perspective of quickly normalizing Daewoo Shipbuilding’s management and strengthening the national competitiveness through nurturing a core industry.”

Five Hanwha Group companies, including Hanwha Aerospace Co., Hanwha Systems Co., Hanwha Impact Partners Inc. and Hanwha Energy Corp., will take part in a 2 trillion-won ($1.49 billion) rights offering next month to acquire the 49.3 percent stake and managerial control of Daewoo Shipbuilding. Hanwha reportedly plans to change the shipbuilder’s name to Hanwha Ocean.

Hanwha Group started out as an explosives business and grew into a conglomerate centered on finance, distribution, leisure and chemical businesses under the management of Chairman Kim Seung-youn. The group is now a global leader in the solar industry by preemptively entering the solar energy market, a future industry.



Vice Chairman Kim Dong-kwan, the eldest son of Kim Seung-youn, has been pushing for Hanwha to become a comprehensive defense company representing Korea. With the acquisition of Daewoo Shipbuilding, Hanwha has established a business portfolio that covers land, sea and air.

Hanwha Group failed to buy Daewoo Shipbuilding after it was selected as the preferred bidder in 2008 when the shipyard was put on sale, due to concerns about the conglomerate’s ability to raise funds to pay more than 6 trillion won for the acquisition.

Currently, Hanwha Group’s defense business is mainly focused on army and air force capabilities. Its K9 self-propelled howitzers for the army account for 50 percent of the global self-propelled artillery market and the company is developing engines and localizing key components for the air force’s KF-21 fighter jet under development.

In addition, it is the only company in Korea that has the technology to manufacture aircraft gas turbine engines and liquid fuel for space launch vehicles. For the navy, however, the company has yet to enter the warship and submarine business, even though it is supplying CMS for naval ships.

Daewoo Shipbuilding has been designing and building destroyers, the main force of the navy, and FFX-II frigates, which are next-generation battleships for the navy. The shipbuilder succeeded in delivering the country‘s first independently designed and built submarine, Dosan Ahn Chang-ho, in 2021.

Hanwha Group will prioritize normalizing Daewoo Shipbuilding’s management. Over the past two years, the shipbuilder’s operating losses have reached 3.4 trillion won and its debt-to-equity ratio reached 1,600 percent at the end of last year. Hanwha also has to reform the shipbuilder’s management and establish a relationship with its militant labor union.

Hanwha’s more fundamental concern is how to boost the shipbuilder’s competitiveness, which has deteriorated over the past decade. Despite the recovery in the shipbuilding industry in recent years, Daewoo Shipbuilding’s orders in the first quarter plunged to $800 million, about one-fifth of what it won a year ago.

The outflow of its key talents and labor shortages are also serious problem. Last year, more than 160 employees moved to rival companies, many of them including special ship design personnel. Hanwha plans to put the troubled shipbuilder back on track as soon as possible by combining the group’s defense sector capabilities with the world-class design and production capabilities held by the shipbuilder.

[ⓒ Pulse by Maeil Business Newspaper & mk.co.kr, All rights reserved]