Hanwha Becomes KAI’s Second-Largest Shareholder, but ... Eximbank Chief Says “No Plans to Sell KAI”

[Financial News] As Hanwha Group has recently moved aggressively to buy shares in Korea Aerospace Industries (KAI), the Export-Import Bank of Korea, KAI’s largest shareholder, has reaffirmed its official position that it has “no plans to pursue privatization for now.” The prevailing view is that it is not yet the right time to sell, given growing market uncertainty, including recent stock price declines, and the government’s priorities. This is seen as a gap between the government’s sale schedule and the moves of potential buyers, including Hanwha Group.
At a parliamentary audit by the National Assembly Finance and Economy Planning Committee on the 20th, Export-Import Bank President Hwang Ki-yeon was asked by Yoon Hoo-deok of the Democratic Party of Korea whether the bank’s recent consulting project on the space and aviation industries had been undertaken with a sale of KAI in mind. He said, “The project was not conducted on the premise of privatization or a sale,” and added, “There are currently no plans to sell KAI.” Hwang added, however, “It is difficult to be categorical about future plans.” Some inside and outside the bank interpret this as a result of President Lee Jae-myung’s order last November to halt all sales of government assets. The measure was intended to prevent controversy over preferential treatment and fire-sale prices in the disposal of government assets.
At the parliamentary audit that day, People Power Party lawmaker Kang Min-guk said, “It makes no sense for one company (Hanwha) to control the land, sea and air sectors of the defense industry,” and asked, “Have you ever received a call from a powerful figure in the ruling camp (saying KAI should be handed over to Hanwha)?” Hwang replied, “No.” Explaining why the bank had recently commissioned consulting on the space and aviation industries, Hwang said, “After the government’s public briefing on its vision for advanced industrial development in the Yeongnam region, we were offered the suggestion, following consultations with the government, that we conduct a study on this area. The bank has corporate clients connected to the space industry, so we considered our role as a policy financing institution and began the project.” In August, when Hanwha became KAI’s second-largest shareholder, the bank commissioned consulting on the space and aviation industries worth 1.8 billion won.
Previous attempts to privatize KAI were made in 2012 and 2016, but both fell through, one after an unsuccessful bidding process and the other amid a decline in KAI’s share price. The sale of KAI shares returned to the fore in the first half of this year, when Hanwha Aerospace and Hanwha Systems aggressively bought shares in the company. As of August, Hanwha Group had overtaken the National Pension Service (8.75%) to become KAI’s second-largest shareholder, with a 15.89% stake. The amount invested is estimated at about 2.2 trillion won. The Export-Import Bank, the largest shareholder, owns 26.41%. The remaining 48.95% is held by foreign investors, including Fidelity (6.63%) and BlackRock (5.02%), as well as the employee stock ownership association (1.01%) and individual investors.
KAI was launched in 1999, with three major conglomerates—Samsung, Daewoo and Hyundai—each contributing an equal 33.3% stake. Around 2006, the Korea Development Bank became a major shareholder during a process to clean up nonperforming loans. KAI shares were later contributed in kind as part of the Export-Import Bank’s capital increase, completing the ownership structure in place today.
Meanwhile, at the parliamentary audit that day, Park Il-young, president of the sovereign wealth fund Korea Investment Corporation (KIC), said in a work briefing, “We will expand the role of the sovereign wealth fund, shifting from a financial investor focused on overseas investment to a ‘strategic investor’ that also invests in key strategic industries at home.” KIC is pursuing an amendment to the Korea Investment Corporation Act to establish a strategic investment account, which would allow it to invest domestically starting next year. Until now, it has only been able to invest overseas.
[email protected] Jo Eun-hyo and Park Moon-soo Reporter