Hyundai Rotem to buy Hyundai Wia defense business for 358.386 billion won
In short
Hyundai Rotem said on October 19 it will buy Hyundai Wia's special business division, its defense business, for 358.386 billion won. The deal puts K2 tank production and main-gun manufacturing in one company. Completion is planned for March 31 next year, after a Hyundai Wia shareholder meeting on November 27.
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Hyundai Rotem said in a disclosure on October 19 that it decided to acquire the special business division, which is the defense business, of Hyundai Wia for 358.386 billion won. Both companies are Hyundai Motor Group affiliates. The target is the division's operating assets and liabilities and the business as a whole, and outlets also list personnel and intellectual property. The price was calculated from a business value of 480 billion won, minus about 117 billion won for land and buildings subject to lease and other items. [ 1 , 2 , 3 , 8 , 9 , 10 ]
Chosun Ilbo reported that both boards approved the transfer on October 19 and that the contract was signed that day. Completion is planned for March 31 next year, though the date may change with conditions and approvals. Hyundai Wia plans to hold a shareholder meeting on November 27. Bloter reported that payment will be in cash, that the final amount may change with assets and liabilities at closing, and that dissenting shareholders may demand a buyback at 51,811 won per share between November 27 and December 16. Dong-A Ilbo reported that Hyundai Motor, Kia and Chairman Chung Eui-sun hold a combined 40.74% of Hyundai Wia, and that the company does not expect a surprise at the meeting. [ 2 , 4 , 12 ]
The division has been Hyundai Wia's founding business since 1976. It produces K9 self-propelled howitzer barrels and K2 tank main guns. Kyunghyang Shinmun reported that Hyundai Rotem designs and builds the K2 tank while Hyundai Wia makes its 120mm main gun. Hyundai Rotem said the aim is vertical integration in defense, and that it expects price competitiveness and more localised items for exports. Asia Economy reported that Hyundai Rotem will take over the division's contracts, including its barrel supply contract with Hanwha Aerospace. [ 1 , 3 , 8 , 9 , 11 ]
Hyundai Rotem will retain all of the division's employees. Kyunghyang Shinmun, Newsis and Seoul Shinmun reported that it plans to move the production plant after the process is complete. Newsis reported on October 20 that production would move from Hyundai Wia's Changwon facility to a new factory on Hyundai Rotem's Changwon site, with Hyundai Wia's existing real estate excluded. Asia Economy said the cost and schedule of the move have not been disclosed. [ 8 , 9 , 11 , 15 , 19 ]
Hyundai Wia said the sale is part of a shift toward future mobility and that proceeds will go to constant-velocity joints, thermal management systems and robotics. Maeil Business reported that Hyundai Wia described the defense business as profitable in the short term but with limited links to its medium- and long-term strategy. Dong-A Ilbo reported that the division is about 5% of Hyundai Wia's revenue. Hyundai Wia separated its machine-tool business last July. [ 8 , 10 , 12 ]
Hyundai Rotem said it had 1.8787 trillion won in cash and cash equivalents at the end of the third quarter, enough to fund the purchase. Dong-A Ilbo reported that Hyundai Wia's shares rose 6.89% to 52,000 won on October 19 and Hyundai Rotem's rose 3.72% to 100,500 won. Yonhap reported on October 20 that brokerages expect business expansion at Hyundai Rotem. [ 9 , 12 , 20 ]
Why it matters
Hyundai Rotem says the deal will improve price and export competitiveness through vertical integration. Hyundai Wia says it will concentrate on future mobility businesses and use the proceeds for investment. Dong-A Ilbo reported expectations that Hyundai Rotem's weight in defense will grow, because the division supplied most gun barrels for land and naval weapons.
Key facts
- Hyundai Rotem agreed to buy Hyundai Wia's special business division for 358.386 billion won, according to its October 19 disclosure. [ 1 , 2 , 3 , 8 , 10 ]
- The price was calculated from a business value of 480 billion won minus about 117 billion won for land and buildings under lease and other items. [ 1 , 2 , 3 , 8 , 10 ]
- The division makes K9 self-propelled howitzer barrels and K2 tank main guns, among other large-caliber guns. [ 1 , 3 , 10 ]
- Completion is planned for March 31 next year, but the date may change with conditions and approvals. [ 2 , 4 ]
- Hyundai Wia plans a shareholder meeting on November 27 to seek approval. [ 2 , 4 , 12 , 15 ]
- Hyundai Rotem said it will keep all of the division's employees. [ 8 , 9 , 11 , 15 ]
Confirmed by several sources
- Hyundai Rotem agreed to acquire Hyundai Wia's special business division, its defense business, for 358.386 billion won. [ 1 , 2 , 3 , 8 , 10 ]
- The acquisition covers the division's operating assets and liabilities, and outlets also list personnel and intellectual property; land and buildings subject to lease are excluded. [ 1 , 2 , 8 , 9 , 10 , 15 ]
- Hyundai Rotem plans to retain all of the division's employees and to move the production plant once the process is complete. [ 8 , 9 , 15 ]
- Hyundai Wia plans to hold a shareholder meeting on November 27 to approve the transfer. [ 2 , 4 , 12 , 15 ]
- Hyundai Wia said it will focus on future mobility, with proceeds going to businesses such as thermal management and robotics. [ 4 , 8 , 10 , 15 ]
- Hyundai Rotem said vertical integration would give it price competitiveness and let it widen localised items for exports. [ 8 , 9 , 10 , 11 , 12 ]
Still unclear
- The final completion date and payment amount. Conditions and regulatory approvals could move the date, and Bloter says changes in assets and liabilities at closing could change the final amount.
- The cost and schedule of moving the production plant. Asia Economy says the extra investment and the specific schedule have not been disclosed.
- The division's annual sales and operating profit. Asia Economy cites industry estimates of about 400 billion won and 40 billion won; no other document gives these figures.
What local media are saying
Timeline, local time
- Yonhap reported Hyundai Rotem's October 19 disclosure of the acquisition. [ 1 ]
- Chosun Ilbo reported that both companies' boards approved the transfer and that the contract was signed on October 19. [ 2 ]
- Yonhap reported that Hyundai Motor Group is consolidating ground-weapons business at Hyundai Rotem while Hyundai Wia focuses on mobility. [ 5 ]
- Dong-A Ilbo reported that both companies' shares rose on October 19: Hyundai Wia closed up 6.89% at 52,000 won and Hyundai Rotem up 3.72% at 100,500 won. [ 12 ]
- On October 20, Newsis reported plans to move production to Hyundai Rotem's Changwon site after closing. [ 19 ]
- On October 20, Yonhap reported that brokerages expect business expansion at Hyundai Rotem. [ 20 ]