Hanwha Group acquires Samsung's defense and chemical subsidiaries

South Korea’s Hanwha Group has signed a deal to acquire 32.4 per cent stake in Samsung Techwin and 57.6 per cent stake in Samsung General Chemicals (81 percent of stocks including Samsung Techwin stake, except treasury stocks) from the Samsung Group. Hanwha Group has emerged as a leading player in the defense industry of Korea through this M&A of Samsung Techwin and Samsung Thales with its sales in the defense business increasing to about Won 2.6 trillion from Won 1 trillion in 2013.
 
In addition, Hanwha Group secures the top ranking in the petrochemical industry in Korea with the sales of 18 trillion won in the petrochemical business through the M&As of Samsung General Chemicals and Samsung Total Petrochemicals.
 
“Through the M&As, Hanwha Group was able to not only realise the economy of scale, but also upgrade its stature in the defense and the petrochemical industries which have been the growth engine of the group for the past 60 years in the largest scale. With the successful concluding of the deal to strengthen its core capabilities in both industries suggested by the Group, Hanwha Group has finished reforming its business structure in the medium-to-long term based on the ‘select and concentration strategy’. Besides, it has gained a strong foothold to grow into one of the world’s top companies in its key business areas,” said Hanwha Group in the press release.
 
The acquisition has helped Hanwha Group to gain competitiveness in the petrochemical industry, and gave the company an opportunity to overcome the petrochemical recession in Asia.
 
Hanwha Group will now be able to produce more ethylene, which is used as feedstock for producing petrochemicals, up to 2.91 million tonnes, making it the ninth largest producer of ethylene in the world. As a result, the Group can achieve economies of scale, which can lead to cost competitiveness through bulk purchases of naphtha. Hanwha Group has also become equipped with the materials in a diversified portfolio (naphtha, condensate and LPG), which enables to prepare for competition with North American and Middle East-based companies on low-cost feedstocks.
 
The product line will also be diversified from the existing products, ethylene derivatives, to polypropylene, para-xylene, and styrene monomer, as well as diesel and jet fuel. This allows the Hanwha Group to minimise risks caused by deteriorating competitiveness and profitability of some existing key products. As a result, a foundation has been established for stable revenue growth.