Fair Trade Commission clears Hanwha's 15.89% stake in Korea Aerospace Industries

Regulator says holding falls short of effective control over KAI management

Hanwha accelerates push to build South Korea's answer to SpaceX

Group plans to invest 55 trillion won by 2040 to become an 'AI space power'

Hanwha Group's headquarters in Jangyo-dong, Seoul. [Hanwha]
Hanwha Group's headquarters in Jangyo-dong, Seoul. [Hanwha]

The Korea Fair Trade Commission has approved Hanwha Group's acquisition of a stake in Korea Aerospace Industries, clearing the way for the conglomerate to accelerate its ambition of building a South Korean equivalent of SpaceX.

The Fair Trade Commission said Monday it had approved a merger filing after three Hanwha affiliates acquired a combined 15.89 percent stake in Korea Aerospace Industries (KAI). The affiliates currently holding KAI shares are Hanwha Aerospace (9.9 percent), Hanwha Systems (4.98 percent) and Hanwha Aerospace USA (1.01 percent).

Under South Korean competition law, a company that acquires shares in another firm must submit to a Fair Trade Commission merger review if the transaction could restrict competition in the relevant market. However, if the acquisition does not establish a controlling relationship, the deal is presumed not to restrict competition.

The commission said in a notice to reporters Monday that Hanwha's 15.89 percent stake alone was not sufficient to give the group effective control over KAI's overall management. It noted that government-linked shareholders — led by the Export-Import Bank of Korea at 26.41 percent and the National Pension Service at 8.75 percent — collectively hold 35.16 percent of KAI, a larger share than Hanwha's.

The commission added, however, that a fresh merger review would be triggered if Hanwha were to become KAI's largest shareholder through additional share purchases, fill more than one-third of KAI's board seats, or have one of its executives serve concurrently as KAI's chief executive.

Hanwha issued a statement Monday thanking the commission for its prompt review and approval. "Hanwha has been pursuing ongoing cooperation with KAI with the aim of strengthening the export competitiveness of South Korea's defense industry and fostering an aerospace ecosystem in South Gyeongsang Province, and the acquisition of KAI shares has been part of that effort," the company said.

"As our KAI stake recently exceeded 15 percent, we filed for a merger review with the Fair Trade Commission and received approval today," the statement said. "Hanwha will continue to seek ways to cooperate with KAI to contribute to strengthening South Korea's defense competitiveness, advancing the nation's aerospace industry and revitalizing the regional economy."

With the approval secured, Hanwha is expected to push ahead with its vision of creating a South Korean counterpart to SpaceX. The group believes that combining with KAI — integrating capabilities across launch vehicles, satellites, aviation platforms and systems integration — would lay the foundation for such a leap.

Hanwha recently unveiled a medium- to long-term strategy it calls "AI Space Power," under which it plans to invest 55 trillion won ($40 billion) by 2040 to develop its own launch vehicles and satellites, build AI data centers for space and defense use, and establish a low-earth-orbit communications network — creating an integrated space and defense infrastructure.

At the time, Hanwha Group Vice Chairman Kim Dong-kwan said South Korea could no longer afford to treat space and aviation as separate industries. "Only when space, aviation, AI and defense are connected as one can we truly leap forward as an AI space power," Kim said.

Industry observers say consolidation is inevitable for South Korean defense firms seeking a stronger foothold in global markets. Hanwha, currently the country's largest defense company, ranks around 20th in the world by sales, while KAI sits around 70th.

In the United States, major defense contractors have already consolidated through mergers and acquisitions into five dominant players: Lockheed Martin, Boeing, Raytheon (RTX), General Dynamics and Northrop Grumman. Europe's Airbus was itself born from the merger of France's Aerospatiale, Germany's DASA and Spain's CASA as a counterweight to American dominance in defense and aviation.


keg@heraldcorp.com