Industry officials said Tuesday that Hanwha Aerospace recently bought a 4.41% stake in KAI. Combined with the 0.58% held by Hanwha Systems, the group’s total stake stands at 4.99%. It marks Hanwha Aerospace’s first KAI share purchase in about seven years, after it sold its entire 5.99% stake in 2018.
The purchase makes Hanwha Group KAI’s fourth-largest shareholder. The Export-Import Bank of Korea is KAI’s largest shareholder with a 26.41% stake.
Hanwha Aerospace said the investment is intended to “expand cooperation in the aerospace business based on a mid- to long-term strategic partnership and strengthen global export competitiveness.”
In South Korea’s defense sector, companies have increasingly pursued joint bids in which a prime contractor signs an export deal and participating firms share the proceeds.
A key example is the KF-21 fighter jet, scheduled to be delivered to the Air Force starting in the second half of this year. KAI produces the airframe, while Hanwha Aerospace supplies the engine.
Last month, Hanwha and KAI signed an agreement on joint cooperation in future core businesses to boost the global competitiveness of South Korea’s defense industry, and said they would expand that collaboration.
Inside KAI, expectations for growth have risen as the company moves toward greater management stability. At an extraordinary shareholders meeting on March 18, shareholders will decide whether to appoint Kim Jong-chul, a former director at the Defense Acquisition Program Administration’s Defense Technology Protection Bureau, as CEO. Some observers say a management vacuum that has lasted for years is entering a resolution phase.
Hanwha has expanded its defense footprint through acquisitions, leaving open the possibility of further KAI share purchases. In 2022, Hanwha secured a 49.3% stake in Daewoo Shipbuilding & Marine Engineering and reorganized it as Hanwha Ocean. Some analysts, however, say Hanwha’s recent expansion could limit the scope for a rapid increase in its KAI stake.
At KAI, the labor union has expressed mixed views, citing expectations for business expansion if the company is brought under a large conglomerate, while also warning of potential conflict during any push toward privatization.
“This stake purchase is more of a strategic investment to strengthen cooperation than a move to take management control,” one industry official said. “Depending on whether additional shares are bought, the direction of the relationship could change.”
* This article has been translated by AI.
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