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Capital raising

Hanwha Systems to launch $1.1 bn rights issue in June

Two other Hanwha units as top shareholders to apply for extra issues

By May 25, 2021 (Gmt+09:00)

Hanwha Systems' Butterfly, a personal air vehicle under development with Overair, a US air taxi startup
Hanwha Systems' Butterfly, a personal air vehicle under development with Overair, a US air taxi startup

Hanwha Systems Co., which leads the satellite communication and urban air mobility (UAM) businesses of South Korea's Hanwha Group, is set to launch a rights offering next month to raise around 1.2 trillion won ($1.1 billion) as the company is looking for new M&A targets and boosting R&D spending.

On May 31, the Hanwha Group unit will price its new 78.7 million shares that amount to 71.3% of its current outstanding shares. The estimated issuance price of 15,800 won apiece is 13% below the current market price.

Shares in Hanwha Systems had tumbled to an almost four-month low of 16,550 last week, down 18% from the closing price on Mar. 30 when it announced the rights offering plan. Since then, however, its share price has been paring losses, allaying market concerns about its massive new issue that is scheduled to list on June 23. At midday, its shares were trading at 8,200 won, up 1.11%.

To ensure the new issue will be well digested, two other Hanwha Group units as top shareholders expressed intention to apply for additional 20% shares plus their allotted quotas. 

Hanwha Aerospace Co. and  H-Solution Corp. hold stakes of 49% and 13.4% in the defence and information technology company. H-Solution is wholly owned by the group Chairman Kim Seung-youn's three sons, including Hanwha Solutions President Kim Dong-kwan.

H-Solution is the single shareholder of Hanwha Energy Corp. that runs Hanwha General Chemical Co. and Hanwha Total Petrochemical Co.

Kymeta makes the next generation of satellite-cellular mobile service systems for voice and data available to military and commercial markets.
Kymeta makes the next generation of satellite-cellular mobile service systems for voice and data available to military and commercial markets.

Hanwha Systems is a key pillar of the defense-to-insurance Hanwha Group that is widening its focus from petrochemicals and explosives to renewable energy, including solar power, hydrogen, as well as future mobility and aerospace.

Last December, Hanwha Systems had invested 33.2 billion won in Kymeta Corp., a US satellite communications firm, following its 30% stake purchase of US air taxi startup Overair earlier in that year.

In partnership with Overair, Hanwha Systems is developing  Butterfly, a personal air vehicle.

It is now in discussion to increase its stake in Overair and to invest in other UAM companies with the aim to develop an air taxi by 2024 and to offer flying car testing services by 2025. The global UAM market is projected at $156 billion in 2026 and forecast to expand to $1.5 trillion by 2040, according to Morgan Stanley.

To ramp up the satellite business, the Hanwha unit acquired Phasor Solutions, a British satellite communication antenna company in 2020.

The termination of the US' missile guidelines for South Korea, announced last week, will likely provide a tailwind to Hanwha. During the Friday summit between US President Joe Biden and South Korean President Moon Jae-in, the US agreed to allow Seoul to develop missiles that can reach beyond the Korean peninsula, lifting the decades-long caps on ranges and payloads for South Korea's missile developments.
UK-based Phasor Solutions is launching a patented antenna technology for communicating with satellites from moving vehicles
UK-based Phasor Solutions is launching a patented antenna technology for communicating with satellites from moving vehicles

FRESH FUNDING BY AFFILIATE, PARENT GROUP

The rights issue will follow another key Hanwha unit's new share issuance this year. In March, Hanwha Solutions Co., a solar module manufacturer, raised 1.3 trillion won in a rights offering, slightly less than its planned 1.4 trillion won.

Earlier this month, the state-run Korea Development Bank agreed to extend 5 trillion won in loan with a low interest rate to Hanwha Group over the next five years. Hanwha will spend the money to acquire and operate eco-friendly solar and hydrogen businesses, as well as to invest in green technology facilities.

Write to Jin-seong Kim at jskim1028@hankyung.com

Yeonhee Kim edited this article.

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