Hanwha Group’s acquisition of Samsung Group’s petrochemical and defense units will further boost Hanwha’s core businesses as it will be able to generate synergy with the purchased assets, industry sources and analysts said.

The 2 trillion won ($1.8 billion) deal, which is said to be a “win-win,” has enabled Samsung to move forward in realigning its units to focus on technology, finance, infrastructure and content businesses under the future leadership of Lee Jay-yong and his two sisters.

Analysts and industry sources said that Samsung Techwin and Samsung Thales have found their “rightful owner” since Samsung was not too fond of the government-controlled defense procurement business.

“Given the nature of the defense business, which is heavily and constantly controlled by the government, it did not seem to suit Samsung,” said an industry source.

Samsung Techwin is known for developing self-propelled artillery and aircraft engines, and its joint venture subsidiary with French defense company Thales ― Samsung Thales ― makes control and radar solutions for tanks, ships and jets.

Techwin’s strategic 10 percent stake in Korea Aerospace Industries, the developer of the T-50 jet trainers, will also be handed over to Hanwha Corp., which makes multiple rocket launchers and precise guided missiles.

The acquisition has led Hanwha, the 10th largest conglomerate in Korea, to create a 9 trillion won defense business, which will be able to compete better in the global market, analysts said.

“Techwin would help Hanhwa compete with the world’s top 30 defense companies and increase its presence in the global defense industry,” said Jang Won-joon, director of the defense and aerospace industry team at the Korea Institute of Industrial Economics and Trade.

Hanwha Chemical and Hanwha Energy will take over Samsung General Chemicals and Samsung Total Petrochemicals, a joint venture between Samsung General Chemicals and French energy conglomerate Total.

This deal would include acquiring assets of Samsung Petrochemical, which was absorbed by Samsung General Chemicals last June. Samsung Group said Samsung C&T, the construction and trading unit, will keep its 18.5 percent stake in Samsung General Chemicals to collaborate with Hanwha in chemical business.

Analysts said Hanwha will see most of the benefits from the deal over the long term, as chemicals and defense are complementary.

“Hanhwa has grabbed a chance to solidify its status in the petrochemical and defense industries,” said Kim Ik-sang, an analyst at HI Investment & Securities.

Samsung and Hanwha said that the two sides will aim to finalize the deal by the end of the first half of next year after conducting due diligence of buy and sell-side assets early next year.

By Park Hyong-ki, Kim Young-won
(hkp@heraldcorp.com) (wone0102@heraldcorp.com)