The acquisition of Korea Aerospace Industries (KAI) is gaining momentum, but it faces challenges including a valuation exceeding 5 trillion won and concerns over monopoly. This has led to discussions about a potential split sale.
According to the defense industry on July 14, KAI's estimated fair purchase price is around 5 trillion won. The value of the current largest shareholder, the Export-Import Bank of Korea, which holds a 26.41% stake, is estimated at 4.5 trillion to 4.8 trillion won when factoring in a management premium of 20-30%. If major bidders like Hanwha Group, Hyundai Motor Group, or the LIG consortium participate actively, the premium could rise above 40%, pushing the price over 5 trillion won.
Given the significant financial burden of the acquisition and the potential monopoly concerns for Hanwha, a split sale is being considered as a viable alternative. KAI's business segments include aviation, which focuses on fixed-wing and rotary-wing platforms; space, which develops satellites and launch vehicles; and maintenance, repair, and operations (MRO) for the aerospace aftermarket.
An industry insider stated, "The interests of the companies considered as strong candidates for KAI are clearly different, and given that these candidates can exert strong ownership, a split sale could actually be a way to maintain KAI's competitiveness. From the government's perspective, ensuring a successful auction at a fair price is also important, so this scenario is worth considering."
If a split sale occurs, Hanwha Group is likely to focus on acquiring fixed-wing and space launch vehicle technologies. With Hanwha Aerospace already possessing aircraft engine technology, integrating KAI's platform technology could lead to vertical integration from engine production to airframe assembly, potentially transforming South Korea into a 'SpaceX'.
Hyundai Motor Group, on the other hand, is focusing on MRO business to secure future mobility and aerospace manufacturing supply chains rather than defense. LIG D&A, known for its precision-guided munitions and avionics, is expected to find synergies in rotary-wing, unmanned aerial vehicles, and avionics sectors. This aligns with the government's and military's interests in countering Hanwha Group's potential monopoly in the defense market.
Opinions on the split sale are divided. Proponents argue it could alleviate monopoly concerns in the defense market and prevent allegations of favoritism towards specific companies. They also highlight the potential for enhancing expertise through synergies in core business areas. However, critics warn that splitting KAI could fragment the organization, diminishing its competitiveness and reducing the efficiency of the MRO business.
A space industry representative noted, "In large corporations, if the business direction does not align, certain areas may be neglected during the restructuring process post-acquisition. It may be more effective to support specific business areas for companies that show active interest."
A KAI union representative stated, "The aerospace market can only grow in a fair competitive environment. If Hanwha absorbs KAI, it could create a 'super subordinate' that the state cannot easily regulate, jeopardizing national interests and public projects. Therefore, the split sale option should be carefully considered for enhancing KAI's competitiveness and advancing the national space industry."
* This article has been translated by AI.
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