Hanwha Solutions seeks spinoffs of Galleria, advanced materials divisions

Hanwha Solutions Corp., the energy and petrochemical arm of the Hanwha Group, is revving up for wide-ranging corporate restructuring to strengthen its solar energy business. 

The company is poised to seek a captive spinoff of its advanced materials division to raise funds, as well as an equity spinoff of the Galleria division.

The Galleria division provides retail services with a strong focus on department stores as evidenced by the two high-end Galleria Department Stores in the swanky Apgujeong district of Seoul. 

The temporary board of directors convened an emergency meeting on Friday to decide on the spinoffs.

A spinoff refers to a type of corporate action where a company divides or splits off corporate sections as a separate business.

Under South Korea’s Commercial Act, there are three types of corporate spinoffs.

In the case of an equity spinoff, the existing company’s shareholders acquire both the existing and newly established companies’ shares. The shares are then usually distributed on a pro-rata basis.

When it comes to a captive or physical spinoff, the new company will become a wholly owned subsidiary of the existing company.

When the upcoming spinoffs are complete, shareholders of Hanwha Solutions will acquire shares of Hanwha Galleria; while Hanwha Advanced Materials will become a wholly owned subsidiary of the existing company. 

The company’s current five business areas will boil down to just three: solar energy; chemical; and domestic solar power development.

UPSCALE RETAIL

As for the upscale department store arm, the Hanwha Group is expected to expand its investment into retail and new businesses as a way to strengthen its competitiveness following an equity spinoff slated for early next year. 

The Galleria division’s revenue increased 13.7% to 514.7 billion won ($363 million) last year while operating profit jumped 10 times to 28.9 billion won ($20.4 million), on the back of surging demand for luxury goods and furniture. 

Through the equity spinoff, Hanwha Solutions will divide the existing shares 9:1, with the Hanwha Solutions taking the majority.

The company aims to list the new Hanwha Galleria shares in March 2023.

The shares' face value will decrease from 5,000 won per share to just 500 won. 

In other words, an existing holder of 10 Hanwha Solutions shares will receive 9 shares of Hanwha Solutions and 10 shares of Hanwha Galleria. 

ADVANCED MATERIALS

The advanced materials division falls under the company’s non-mainstream business. 

Last year, advanced materials only accounted for 4% of the company’s operating profit.

The word on the street is that Hanwha is in talks with Seoul-based Glenwood Private Equity to sell some 49% of the soon-to-be-established advanced materials company.

Hanwha Solutions plans to use the fresh injection of funds for facilities development at its solar energy plant in the United States. 

The company vowed to adopt several different systems to preemptively protect the interest of minority shareholders and to bolster communications, including a tender offer. 

It will also seek a capital increase of 40 billion won by issuing new stocks, provided that the Galleria shares can be listed next March. 

Write to Ik-Hwan Kim at lovepen@hankyung.com
Jee Abbey Lee edited this article.