Five critical questions for Vice Chairman and Co-CEO Kim Dong Kwan and his two brothers regarding the Hanwha Corp Spin-off
- Hanwha Corp shares rallied 26% in the eight sessions prior to the spinoff announcement, jumping another 22% over the next three days post the disclosure
- The decision was made solely from the perspective of the three brothers, while completely marginalizing the interests of minority shareholders
- The decision was made solely from the perspective of the three brothers, while completely marginalizing the interests of minority shareholders
- Mandate a Majority of the Minority(MoM) at the June 15th EGM to ensure a fair and transparent outcome for non-controlling shareholders
- Explicitly commit to a dividend policy based on consolidated financials per new government tax policy and significantly improve the low dividend yield
- Replace existing directors with new, more qualified members. The current four independent directors lack the requisite business experience
- Minority shareholders who exited via the W30,000 tender offer in 2024 stand as a testament to the company's past failures. Without sincere efforts from the controlling Kim family to protect minority interests, the valuation gap will never narrow down
On January 14th, Hanwha Corp. announced a spin-off, separating its core defense/aerospace, shipbuilding & marine offshore, energy/chem, and finance holdings from a new holding company with tech and life solutions. The market responded with a massive rally, reflecting a deep discount - the shares were trading at a 63% discount to NAV as of end-2024. The stock surged 26% in the eight sessions prior to the disclosure and jumped another 22% post-announcement for three days. While Hanwha Corp’s market cap has quintupled to W9 trillion over the two years- anchored by its W20 trillion stake in Hanwha Aerospace - the company continues to face the steepest discount among its local peers due to governance risks and weak shareholder returns.
While the new value-up plan disclosed on the same day as the spin-off announcement shows a more polished 'procedural effort' than the July 2024 Hanwha Energy tender offer, it remains a superficial improvement. Acknowledging a 12% cost of capital is a surprisingly honest admission, yet the split itself remains unfaithful to the revised Commercial Code's core principle: the fiduciary duty to treat all shareholders equitably. Instead of a fair deal for the public, this restructuring looks like was made solely from the perspective of the Group Chairman Kim Seung-youn’s three sons, Vice Chairman Kim Dong Kwan, President Kim Dong-won, and Executive Vice President Kim Dong-sun - while leaving minority shareholders completely out of the equation.
Our Forum would like to ask the three sons with five critical questions:
First, from the perspective of Hanwha Corp’s minority shareholders, the most critical flaw in this spin-off is that while the company and its board justify the move as a way to reduce the NAV discount and enhance shareholder value, they have failed to select the 'clearly better alternative.' From a minority shareholder's viewpoint - as opposed to that of EVP Kim Dong-sun, who is preparing for control of a new holding company - establishing only a single new holding company has fundamental limitations in truly driving corporate value.
As illustrated above, in our view, the restructuring should move toward separating the holding company into eight distinct holding companies: the four existing sectors (defense/aerospace, shipbuilding/marine, energy/chem, and finance), two newly established sectors (tech solutions and life solutions), and two standalone businesses within Hanwha Corp (construction and global). Only then can the discount be fundamentally reduced. Under the proposed new holding company, the 'tech' and 'leisure/retail/F&B' units possess entirely different industrial characteristics. These eight sectors fall under different MSCI sector classifications and exhibit significant variances in the long-term growth rates provided by the company; therefore, bundling these businesses for the convenience of the controlling Kim family is a textbook case of value destruction for minority shareholders.
The directors' fiduciary duty to shareholders mandates that for a decision of this magnitude, the board must exhaustively vet multiple strategies and choose the one that most effectively enhances shareholder value. Yet, the company has offered no evidence that it compared the current plan against superior alternatives. There is no transparency regarding why this specific spin-off was chosen over others. For minority shareholders, the mere promise that things will be 'better than before' is a fundamentally insufficient justification for such a transformative restructuring.
Was a Special Committee of independent directors ever formed to provide the necessary oversight for this massive restructuring? A mere 3 hours and 10 minutes of 'preliminary briefings' is a fundamentally insufficient timeframe for a decision of this magnitude. Did the board even discuss the idea of disposing non-core assets for better focus and value creation? Why is the company still holding onto a 1.2% non-core stake in Korea Zinc? We demand that this W380 billion investment asset be liquidated immediately and returned to shareholders.
Second, the board must commit to a Majority of Minority (MoM) for the June 15th EGM to guarantee procedural fairness. This MoM directly aligns with the Ministry of Justice’s recent guidelines on Commercial Code revision, which prioritize the voices of disinterested shareholders during corporate restructurings. To demonstrate genuine sincerity regarding shareholder value, the Kim brothers should conduct a comprehensive survey of minority shareholders overseen by the Special Committee. Full transparency is essential; therefore, both the methodology and the findings of this engagement must be detailed in the company’s official disclosure.
Third, the board must align its dividend policy based on consolidated financials (in line with with the global standard), moving away from outdated parent only metrics. The Ministry of Economy and Finance’s January 16th Enforcement Decree explicitly defines the dividend payout ratio based on consolidated net income attributable to owners of the parent. Consequently, Hanwha’s 2025 proposed minimum dividend of W1,000 - a meager 0.8% yield - is fundamentally insufficient, in our opinion. While management continues to defend its payout on a parent only basis during conference calls, such a narrow view is no longer acceptable. To resolve the massive NAV discount, the board must significantly elevate its dividend payout to reflect the group’s consolidated earning power.
Fourth, the board requires a radical upgrade. The current reliance on legal and academic figures fails to provide the business expertise needed to understand and guide corporate value. We urge the company to recruit independent directors with deep expertise in business,corporate governance and capital markets. More importantly, the board must be held accountable through objective metrics: we recommend using the NAV reduction as a primary KPI for determining director reappointment.
Finally, we strongly demand that all future decisions be rooted in a sincere commitment to all shareholders. Although the 76:24 spin off ratio follows a conventional 'net asset' valuation according to the company, the underlying mechanics are highly questionable. The fact that the new holding company is being launched with zero debt and a W100 billion cash injection - while the surviving entity retains the group's financial burdens - raises doubts about whether this ratio was truly designed with a level playing field in mind.
Following the likely approval of the 76:24 spin off ratio at the June 15th EGM, the market debut on July 24th will likely see a flight of capital from the new entity to the surviving one. This phenomenon exemplifies structural coercion, a systemic pressure that compels shareholders toward a specific, disadvantageous action. Forcing minority shareholders to 'jump ship' from an overvalued new entity to protect their investment is a clear violation of fair governance. We maintain that any restructuring that induces such involuntary behavior is a fundamental infringement on shareholder rights.
Shareholders vividly remember the July 2024 tender offer by the family controlled Hanwha Energy, where those who trusted the company's 'responsible management' narrative sold at W30,000, missing the climb to W123,900. This was a flagrant abuse of information asymmetry and corporate power, characterized by the very self-dealing. With the revised Commercial Code now in effect, the Kim brothers are legally bound to treat every shareholder equitably. Sincerity in 'value-up' cannot coexist with the exploitation of insider advantage.
The Kim brothers must answer for the systematic infringement on minority rights at various Group affiliates that has characterized Hanwha Energy’s rise from scratch. This family-owned vehicle has consistently benefited from unfair deal-making and tunneling, leaving minority shareholders to bear the cost of the group's generational transition. We call for a concrete plan to rectify these past grievances. Additionally, Hanwha Corp must end its 'piecemeal' approach to restructuring. We demand a transparent master plan that outlines the final governance destination, ensuring that minority shareholders are not merely observers, but active participants whose interests are fully reflected in every decision.
January 21st, 2026
The Korean Corporate Governance Forum
Chairman, Namuh Rhee
Five critical questions for Vice Chairman and Co-CEO Kim Dong Kwan and his two brothers regarding the Hanwha Corp Spin-off
On January 14th, Hanwha Corp. announced a spin-off, separating its core defense/aerospace, shipbuilding & marine offshore, energy/chem, and finance holdings from a new holding company with tech and life solutions. The market responded with a massive rally, reflecting a deep discount - the shares were trading at a 63% discount to NAV as of end-2024. The stock surged 26% in the eight sessions prior to the disclosure and jumped another 22% post-announcement for three days. While Hanwha Corp’s market cap has quintupled to W9 trillion over the two years- anchored by its W20 trillion stake in Hanwha Aerospace - the company continues to face the steepest discount among its local peers due to governance risks and weak shareholder returns.
While the new value-up plan disclosed on the same day as the spin-off announcement shows a more polished 'procedural effort' than the July 2024 Hanwha Energy tender offer, it remains a superficial improvement. Acknowledging a 12% cost of capital is a surprisingly honest admission, yet the split itself remains unfaithful to the revised Commercial Code's core principle: the fiduciary duty to treat all shareholders equitably. Instead of a fair deal for the public, this restructuring looks like was made solely from the perspective of the Group Chairman Kim Seung-youn’s three sons, Vice Chairman Kim Dong Kwan, President Kim Dong-won, and Executive Vice President Kim Dong-sun - while leaving minority shareholders completely out of the equation.
Our Forum would like to ask the three sons with five critical questions:
First, from the perspective of Hanwha Corp’s minority shareholders, the most critical flaw in this spin-off is that while the company and its board justify the move as a way to reduce the NAV discount and enhance shareholder value, they have failed to select the 'clearly better alternative.' From a minority shareholder's viewpoint - as opposed to that of EVP Kim Dong-sun, who is preparing for control of a new holding company - establishing only a single new holding company has fundamental limitations in truly driving corporate value.
As illustrated above, in our view, the restructuring should move toward separating the holding company into eight distinct holding companies: the four existing sectors (defense/aerospace, shipbuilding/marine, energy/chem, and finance), two newly established sectors (tech solutions and life solutions), and two standalone businesses within Hanwha Corp (construction and global). Only then can the discount be fundamentally reduced. Under the proposed new holding company, the 'tech' and 'leisure/retail/F&B' units possess entirely different industrial characteristics. These eight sectors fall under different MSCI sector classifications and exhibit significant variances in the long-term growth rates provided by the company; therefore, bundling these businesses for the convenience of the controlling Kim family is a textbook case of value destruction for minority shareholders.
The directors' fiduciary duty to shareholders mandates that for a decision of this magnitude, the board must exhaustively vet multiple strategies and choose the one that most effectively enhances shareholder value. Yet, the company has offered no evidence that it compared the current plan against superior alternatives. There is no transparency regarding why this specific spin-off was chosen over others. For minority shareholders, the mere promise that things will be 'better than before' is a fundamentally insufficient justification for such a transformative restructuring.
Was a Special Committee of independent directors ever formed to provide the necessary oversight for this massive restructuring? A mere 3 hours and 10 minutes of 'preliminary briefings' is a fundamentally insufficient timeframe for a decision of this magnitude. Did the board even discuss the idea of disposing non-core assets for better focus and value creation? Why is the company still holding onto a 1.2% non-core stake in Korea Zinc? We demand that this W380 billion investment asset be liquidated immediately and returned to shareholders.
Second, the board must commit to a Majority of Minority (MoM) for the June 15th EGM to guarantee procedural fairness. This MoM directly aligns with the Ministry of Justice’s recent guidelines on Commercial Code revision, which prioritize the voices of disinterested shareholders during corporate restructurings. To demonstrate genuine sincerity regarding shareholder value, the Kim brothers should conduct a comprehensive survey of minority shareholders overseen by the Special Committee. Full transparency is essential; therefore, both the methodology and the findings of this engagement must be detailed in the company’s official disclosure.
Third, the board must align its dividend policy based on consolidated financials (in line with with the global standard), moving away from outdated parent only metrics. The Ministry of Economy and Finance’s January 16th Enforcement Decree explicitly defines the dividend payout ratio based on consolidated net income attributable to owners of the parent. Consequently, Hanwha’s 2025 proposed minimum dividend of W1,000 - a meager 0.8% yield - is fundamentally insufficient, in our opinion. While management continues to defend its payout on a parent only basis during conference calls, such a narrow view is no longer acceptable. To resolve the massive NAV discount, the board must significantly elevate its dividend payout to reflect the group’s consolidated earning power.
Fourth, the board requires a radical upgrade. The current reliance on legal and academic figures fails to provide the business expertise needed to understand and guide corporate value. We urge the company to recruit independent directors with deep expertise in business,corporate governance and capital markets. More importantly, the board must be held accountable through objective metrics: we recommend using the NAV reduction as a primary KPI for determining director reappointment.
Finally, we strongly demand that all future decisions be rooted in a sincere commitment to all shareholders. Although the 76:24 spin off ratio follows a conventional 'net asset' valuation according to the company, the underlying mechanics are highly questionable. The fact that the new holding company is being launched with zero debt and a W100 billion cash injection - while the surviving entity retains the group's financial burdens - raises doubts about whether this ratio was truly designed with a level playing field in mind.
Following the likely approval of the 76:24 spin off ratio at the June 15th EGM, the market debut on July 24th will likely see a flight of capital from the new entity to the surviving one. This phenomenon exemplifies structural coercion, a systemic pressure that compels shareholders toward a specific, disadvantageous action. Forcing minority shareholders to 'jump ship' from an overvalued new entity to protect their investment is a clear violation of fair governance. We maintain that any restructuring that induces such involuntary behavior is a fundamental infringement on shareholder rights.
Shareholders vividly remember the July 2024 tender offer by the family controlled Hanwha Energy, where those who trusted the company's 'responsible management' narrative sold at W30,000, missing the climb to W123,900. This was a flagrant abuse of information asymmetry and corporate power, characterized by the very self-dealing. With the revised Commercial Code now in effect, the Kim brothers are legally bound to treat every shareholder equitably. Sincerity in 'value-up' cannot coexist with the exploitation of insider advantage.
The Kim brothers must answer for the systematic infringement on minority rights at various Group affiliates that has characterized Hanwha Energy’s rise from scratch. This family-owned vehicle has consistently benefited from unfair deal-making and tunneling, leaving minority shareholders to bear the cost of the group's generational transition. We call for a concrete plan to rectify these past grievances. Additionally, Hanwha Corp must end its 'piecemeal' approach to restructuring. We demand a transparent master plan that outlines the final governance destination, ensuring that minority shareholders are not merely observers, but active participants whose interests are fully reflected in every decision.
January 21st, 2026
The Korean Corporate Governance Forum
Chairman, Namuh Rhee