Hanwha becomes KAI's second-largest shareholder after antitrust approval

Hanwha Group's acquisition of shares in Korea Aerospace Industries has received final approval from South Korea's antitrust regulator.

The Korea Fair Trade Commission said Monday it approved the share acquisition in KAI by Hanwha Aerospace and two other Hanwha affiliates.

The Fair Trade Commission determined that the share acquisition does not establish a controlling relationship between Hanwha and KAI, and therefore poses no risk of restricting competition. On that basis, it approved the transaction without a full standard review.

Hanwha Systems said on Aug. 10 that it had purchased an additional 3.45 percent stake in KAI on the open market over the previous month, bringing Hanwha's combined KAI shareholding to 15.89 percent. By affiliate, Hanwha Aerospace holds 9.90 percent, Hanwha Systems 4.98 percent, and Hanwha Aerospace USA 1.01 percent.

The transaction became subject to Fair Trade Commission notification because Hanwha's combined stake exceeded the 15 percent threshold that triggers merger filing requirements for listed companies. Under the Fair Trade Act, a business combination that places previously independent companies under a single controlling relationship must undergo a standard review.

However, a share acquisition that does not result in actual control over the target company may be exempted from a standard review on the grounds that it poses no competitive risk. The commission determined that Hanwha's KAI stake acquisition falls into that category.

Even after the acquisition, the Export-Import Bank of Korea remains KAI's largest shareholder with a 26.41 percent stake. Hanwha has risen to second-largest shareholder at 15.89 percent, but the National Pension Service also holds 8.75 percent.

The Export-Import Bank and the National Pension Service together hold 35.16 percent. Given this shareholder structure, the commission concluded that Hanwha's stake of more than 15 percent alone is not sufficient to give it effective control over KAI's overall management.

However, if Hanwha's influence over KAI expands through additional share purchases or the appointment of overlapping executives, the transaction could again become subject to merger notification requirements.

"If Hanwha acquires additional KAI shares to become the largest investor, concurrently holds positions for one-third or more of KAI's executive board, or takes on the role of KAI's chief executive, a new merger filing obligation will arise under the Fair Trade Act," the commission said. "In that case, a fresh merger review will be conducted."