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Rights offering

Hanwha Systems’ $1 bn rights offer oversubscribed; investors to book gains

Proceeds to finance bids for further urban air mobility and aerospace businesses

By Jun 07, 2021 (Gmt+09:00)

Hanwha Systems' Butterfly, a personal air vehicle 
Hanwha Systems' Butterfly, a personal air vehicle 

South Korea’s Hanwha Systems Co. is set for a successful rights offering as the defense and air mobility unit of Hanwha Group has garnered strong interest from its existing shareholders for the new share issue.

Hanwha Systems said on Monday it has attracted 7.4% more requests for its share sale worth 1.16 trillion won ($1 billion) during the two-day subscription earlier this month from its current shareholders and the employee stock ownership association.

Its two largest shareholders, Hanwha Aerospace Co. and H-Solution Corp., which hold 49% and 13.4% of Hanwha Systems, respectively, oversubscribed to the rights offer at 120%.

The company is issuing some 78.7 million new shares at 14,750 won apiece, a 19% discount to the stock’s closing price of 17,550 won on Monday. The new shares will start trading on the main bourse on June 23.

H-Solution -- wholly owned by Group Chairman Kim Seung-youn’s three sons, including Kim Dong-kwan, president of Hanwha Solutions Corp. -- is the single shareholder of Hanwha Energy Corp., which runs Hanwha General Chemical Co. and Hanwha Total Petrochemical Co.

Hanwha Systems is offering new shares to existing shareholders to raise money for mergers and acquisitions (M&As) and research and development (R&D) projects, particularly in the aerospace business.

ACTIVE PURSUIT OF M&As IN UAM, AEROSPACE BUSINESSES

Hanwha Systems is a pillar of the defense-to-insurance Hanwha Group, now 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 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.

Hanwha Systems' Butterfly, a personal air vehicle 
Hanwha Systems' Butterfly, a personal air vehicle 

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

It is now in discussions to increase its stake in Overair and to invest in other urban air mobility (UAM) companies with an 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 also acquired Phasor Solutions, a British satellite communication antenna company in 2020.

The rights issue follows another key Hanwha unit's new share sale earlier this year. In March, Hanwha Solutions, a solar module manufacturer, raised 1.3 trillion won in a rights offering.

Earlier this month, the state-run Korea Development Bank agreed to extend 5 trillion won in a 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

In-Soo Nam edited this article.

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