Hyundai Rotem to acquire Hyundai Wia's defense unit for W358.4b, creating vertically integrated tank and gun barrel production

Hyundai Motor Group is reorganizing its defense business around Hyundai Rotem. Hyundai Rotem will acquire Hyundai Wia's defense unit for approximately 358.4 billion won ($267 million), building a production system that spans complete weapons platforms such as tanks through to key components including main guns and gun barrels. Hyundai Wia plans to channel the proceeds into future mobility businesses such as thermal management systems and robotics.

Hyundai Rotem and Hyundai Wia each held board meetings Monday and disclosed that they had decided to sign a business transfer agreement covering Hyundai Wia's special business division.

The transaction price is 358.39 billion won. The division's operating value was assessed at 480 billion won, but the final transfer price was set after excluding land and buildings worth 117 billion won that will instead be converted into a lease arrangement.

The sale covers the operating assets, liabilities and transferable employees of Hyundai Wia's special business division — in short, the entire business. The related land and buildings, however, are not included in the transfer.

Hyundai Wia's special business division produces main guns for the K2 tank and gun barrels for the K9 self-propelled howitzer. Based on last year's figures, the division posted sales of 393.1 billion won, accounting for 4.6 percent of Hyundai Wia's total revenue. Its assets stood at 354.9 billion won, roughly 5 percent of the company's total.

Hyundai Rotem aims to achieve vertical integration of its defense business through the acquisition. The company plans to add main gun and gun barrel manufacturing technology to its existing capabilities in producing ground weapons systems — including the K2 tank and wheeled armored vehicles — to strengthen supply stability and business competitiveness for key components.

With K2 tank exports continuing to expand, the ability to produce major armament components in-house is expected to generate synergies in production scheduling and quality control.

The transaction is targeted for completion by March 31 next year. Hyundai Wia plans to hold an extraordinary general meeting at its headquarters in Changwon, South Gyeongsang Province, on Nov. 27 to put the business transfer to a shareholder vote. Hyundai Rotem will proceed with the acquisition through a board resolution, without holding a separate shareholder meeting.

Hyundai Wia shareholders who oppose the business transfer will be granted appraisal rights. The disclosed expected share buyback price is 51,811 won per share. The deal also includes a condition allowing the company to halt the transaction through a board resolution if total share buyback requests exceed 140 billion won.

Hyundai Wia will use the sale as an opportunity to reshape its business portfolio around future mobility. Following last year's divestiture of its machine tool business, the company is now exiting defense as well, with plans to concentrate resources on thermal management systems, robotics and smart manufacturing solutions. The short-term earnings gap created by selling a highly profitable defense business, however, remains a challenge.

Hyundai Wia intends to use the proceeds from the defense sale to fund investment in new businesses including thermal management and robotics. The company plans to expand its supply of automotive thermal management components in line with Hyundai Motor Group's electrification push, and to strengthen its competitiveness in logistics and parking robots as well as smart manufacturing solutions. It is also pursuing expanded hybrid engine production at its Mexico factory and a scale-up of constant velocity joint production capacity in India.