South Korea Approves Hanwha’s KAI Stake Purchase, Finding No Competition Concerns

South Korea’s Fair Trade Commission approved Hanwha’s purchase of a 15.89% stake in Korea Aerospace Industries, deciding that the acquisition did not threaten competition.

The commission said on Aug. 31 that Hanwha Aerospace, Hanwha Systems and Hanwha Aerospace USA could acquire the shares without a standard merger review. Under the Fair Trade Act, such a review generally applies when independent companies come under a single controlling relationship. The commission said Hanwha’s purchase did not reach that threshold.

Hanwha Systems bought an additional 3.45% of KAI on the market over a month beginning July 8, the group disclosed earlier. The new purchase brought Hanwha’s combined holdings to 15.89%, consisting of 9.90% held by Hanwha Aerospace, 4.98% by Hanwha Systems and 1.01% by Hanwha Aerospace USA.

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There are no concerns that the acquisition by Hanwha restricts competition.

KAI’s largest shareholder remains the Korea Export-Import Bank, with 26.41%. The National Pension Service holds another 8.75%, giving government-linked shareholders a combined 35.16%. The commission said Hanwha’s stake alone did not give it practical control over KAI’s overall management.

The approval does not remove all future regulatory conditions. The commission said Hanwha would have to file a new merger notification if it acquired more shares and became KAI’s largest shareholder, had executives hold at least one-third of KAI’s board positions concurrently, or had its representative director hold the equivalent post at KAI. A new review would then follow.

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If Hanwha acquires additional KAI shares and becomes the largest shareholder, or if its executives concurrently hold at least one-third of KAI’s director positions or its representative director post, a new merger notification obligation will arise under the Fair Trade Act.