Hanwha to buy controlling stake in Korean satellite maker

Hanwha Aerospace Co., an aircraft engine components maker, will acquire a 30% stake in a South Korean Earth observation satellite maker for 109 billion won ($99 million), as its parent Hanwha Group pushes hard into the aerospace industry. 

With the stake purchase, Hanwha will become the largest shareholder in Satrec Initiative Co. listed on the junior Kosdaq market, the two companies said on Jan. 13. 

“This investment decision is part of our efforts to secure satellite development technology and gain an edge in the space industry,” said a Hanwha official.

In a new year’s speech, Hanwha Group Chairman Kim Seung-youn picked aerospace, mobility and hydrogen energy as the group’s new growth areas.

Last month, Hanwha Systems Co., a subsidiary of Hanwha Aerospace, announced the purchase of a 9.11% stake in the US satellite communications firm Kymeta to enter the satellite-cellular mobile service system market.

Satrec was founded in 1999 by the developers of South Korea’s first satellite launched in 1992. The founders studied at KAIST, a Korean national research university.

The company is now concentrating on developing high-performance satellite systems for Earth observation. Its products include electro-optical payloads designed for imaging on small and medium satellite platforms, as well as defense products such as mobile ground systems used in the South Korean government’s satellites and armed forces.

In 2019, Satrec earned 7.3 billion won in net profit on sales of 70.2 billion won.

Hanwha Aerospace will secure the stake in Satrec through new shares and convertible bonds by April. Initially, it will acquire a 20% stake through new shares in a third-party placement for 59 billion won. Then, it will expand its ownership to 30% through convertible bonds worth 50 billion won.

The purchase price for new shares was set at 32,426 won apiece, or a 22% discount from Tuesday’s close of 41,200 won, a day before the acquisition announcement. Each of the bonds will be converted into Satrec shares for 38,219 won.

For its part, Hanwha Aerospace is developing a liquid rocket engine for South Korea's second carrier rocket, independently developed by the country. The rocket is scheduled for launch in October of this year. Hanwha Systems produces satellite sensor and imaging systems, as well as synthetic aperture radar (SAR) imaging used in Earth observation. 

FUND INFLOWS INTO SATELLITE STARTUPS 

The rapid growth in the small satellite market was behind Hanwha's decision to acquire a stake in the satellite systems developer. With demand rising for broadband, TV and Earth observation services, large amounts of venture capital funds have been funnelled into the industry globally. 

Perigee Aerospace Inc., a South Korean manufacturer of orbital and sub-orbital launch vehicles, has recently raised around 10 billion won in Series B funding from domestic venture capital firms and state-run Korea Development Bank, according to industry sources on Thursday. It marked KDB's first investment in the startup.

Its existing investors, which had participated in Perigee’s Series A funding round of $12 million, made additional investments in the startup. The investors include LB Investment, Samsung Venture Investment Corp., STIC Ventures Inc. and Mirae Asset Venture Investment Co. 

The fundraising comes on the heels of an 8 billion funding package for another Korean small satellite launcher startup, Innospace Co.

Both companies are developing launch systems for small satellites weighing up to 500 kg, called nanosatellites. They are planning to expand into launchers for microsatellites and minisatellites.

Perigee focuses on liquid fuel-powered engines, while Innospace is developing a hybrid engine motor using both solid fuel and liquid oxidizers.

“Investments are diversifying across the value chain of the satellite industry from the launchers that place satellites into orbit and satellites themselves to supporting systems for their launch and operation,” said an investment banking source.

Write to Kyung-min Kang and Jung-hwan Hwang at kkm1026@hankyung.com
Yeonhee Kim edited this article.