Hanwha Corp., the holding company of South Korea’s Hanwha Group, is weighing a large-scale capital injection into its cash-strapped affiliate Hanwha Solutions through a rights offering, prompting speculation that it could fund the move by selling shares in Korea Zinc.
Hanwha Solutions, the group's energy unit, on March 26 announced a capital increase of 2.4 trillion won ($1.59 billion) to improve its balance sheet and financial position.
Hanwha Corp., as the largest shareholder of Hanwha Solutions with a 36.3 percent sake, plans to take up its entire allotment in the rights offering, and is also considering an oversubscription, according to sources.
Based on the planned allocation ratio of about 0.33 new shares for each existing share, Hanwha Corp., is expected to be entitled to around 21.12 million new shares. Fully subscribing to that allocation would require roughly 700 billion won. ($464 million).
The company is also considering exercising an additional 20 percent subscription on top of its allocated shares — purchasing any shares left unclaimed following the primary offering.
But at the end of last year, Hanwha Corp. held only 130.3 billion won in cash and cash equivalents on a standalone basis, making external fundraising unavoidable.
Sources say Hanwha will mainly resort to asset sales rather than additional borrowing, as the group seeks to minimize debt amid criticism that the rights offering could dilute shareholder value.
Potential assets for sale include real estate holdings and stakes in other companies. At the end of last year, Hanwha Corp. possessed 350.5 billion won in investment property, 408 billion won in land and 185.7 billion won in buildings, along with stakes in other firms valued at nearly 6 trillion won.
However, given the tight window ahead of the June 30 rights offering payment deadline, market observers consider an equity sale to be a more realistic option than a real estate transaction.
Among the assets being weighed, market observers have zeroed in on Hanwha Corp’s 1.28 percent stake in Korea Zinc, equivalent to 238,385 shares. Hanwha acquired the stake in 2022 as part of a strategic partnership with Korea Zinc, when the two sides exchanged treasury shares. Under the deal, Hanwha transferred 7.25 percent of its treasury stock to Korea Zinc, while Korea Zinc handed over a 1.28 percent stake.
At Monday’s share price, Hanwha’s stake in Korea Zinc is estimated to be 358 billion won.
Some analysts say Hanwha Corp. has little incentive to hold onto its Korea Zinc stake, particularly after Korea Zinc offloaded its position in Hanwha Corp. during a management dispute in 2024.
A Hanwha official, however, denied that the group was considering a sale of its Korea Zinc stake.
The scale of Hanwha Corp.'s participation in the rights offering and the methods of financing is expected to be finalized soon through a board decision and other internal procedures, according to sources.
sahn@heraldcorp.com
