As Hanwha Solutions (009830.KS) launches a large-scale rights offering to improve its financial health, its largest shareholder Hanwha Corp. (000880.KS) plans to fund its participation through asset liquidation rather than additional borrowing.
Hanwha Corp., which holds a 36.31% stake in Hanwha Solutions as its largest shareholder, intends to fully subscribe to its allocated shares and potentially more, industry sources said Monday. Based on the new share allocation ratio of approximately 0.33 shares per existing share, Hanwha Corp. would receive at least 21.12 million shares, amounting to roughly 700 billion won ($510 million).
Hanwha Corp. is also carefully considering an "over-subscription" of 20% above its allocation to demonstrate responsibility as a major shareholder, sources said. Over-subscription is a system that allows additional allocation of unsubscribed fractional shares remaining after existing shareholders' subscription. If Hanwha Corp. subscribes to 120% of its allocation, the total investment would rise to approximately 840 billion won ($612 million).
Hanwha Corp. has decided to raise funds for the rights offering participation through asset liquidation rather than borrowing. The company held only 130.3 billion won in cash and cash equivalents on a separate financial statement basis as of last year, making it difficult to cover subscription payments of several hundred billion won without separate fundraising.
Analysts say the decision to choose asset liquidation over borrowing reflects concerns about the appropriateness of the rights offering and controversy over shareholder value dilution. Minimizing the deterioration of financial soundness at Hanwha Corp., which serves as the de facto holding company of Hanwha Group, is also cited as a factor behind the decision.
Hanwha Corp.'s debt-to-equity ratio on a standalone basis rose from 194.3% in 2024 to 209.6% last year. With a workforce spin-off scheduled for July, the ratio is expected to surge to around 300% as capital is split while debt remains.
The exact scale of Hanwha Corp.'s participation and funding method will be determined through a board resolution, the company said. Assets available for liquidation include real estate such as land and buildings, and stakes in other companies. As of the end of last year, the company held 350.5 billion won in investment real estate, 408 billion won in land and 185.7 billion won in buildings, while its equity investments in other companies totaled 5.9553 trillion won.
Given that less than three months remain until the June 30 payment date for the Hanwha Solutions rights offering, industry observers note that stakes in other companies — which can be converted to cash faster — are a more realistic option than real estate, which requires time to secure buyers and conduct due diligence.
Industry watchers are paying particular attention to Hanwha Corp.'s 1.28% stake (238,358 shares) in Korea Zinc (010130.KS). In 2022, Hanwha Corp. swapped 7.25% of its treasury shares for 1.2% of Korea Zinc's treasury shares to strengthen a strategic partnership for business cooperation.
The book value of the Korea Zinc stake is approximately 313.7 billion won, which could cover a substantial portion of the Hanwha Solutions rights offering payment. Some observers note that Hanwha Corp.'s rationale for holding the Korea Zinc stake has weakened after Korea Zinc disposed of its Hanwha Corp. shares first during a management control dispute in 2024. However, a Hanwha official said, "We have never considered selling the Korea Zinc stake."
