Hyundai Rotem is set to absorb Hyundai Wia's defense business. By securing a production line for the main gun of K2 tanks, Hyundai Rotem will achieve vertical integration in the defense sector, while Hyundai Wia will be able to focus on future mobility businesses.
Hyundai Wia announced that it decided at its board of directors meeting on the 19th to transfer its Special Business Division to Hyundai Rotem. The acquisition price for the relevant business division by Hyundai Rotem is 358.386 billion won.
The subject of the transfer includes all assets and liabilities of the Special Business Division, such as operating assets. The payment will be made in cash, with the transaction closing on March 31 next year.
The transfer amount is calculated by deducting 117 billion won for leased land and buildings from the 480 billion won operating value of the Special Business Division.
Real estate was excluded from the transfer scope. EY Han Young, the external evaluation firm, applied the Discounted Cash Flow (DCF) model to assess the business division's value at between 388.6 billion and 483.3 billion won. The final amount may be adjusted based on changes in net assets from the valuation base date at the end of last year until the transaction closing date.
This business division is Hyundai Wia's foundational business, continuing since the company's establishment in 1976. It primarily produces artillery pieces such as the barrel of the K9 self-propelled howitzer and the main gun of the K2 tank.
As of the end of last year, its revenue was 393.1 billion won and assets were 354.9 billion won, accounting for approximately 4.6% and 5% of the company's total, respectively.
For Hyundai Rotem, which manufactures K2 tanks, the acquisition of Hyundai Wia's Special Business Division enables vertical integration. The company will be upgraded to an entity capable of producing both the main body of the K2 tank and its primary weapon, the main gun.
Effects such as securing price competitiveness and expanding localized items are expected. Hyundai Rotem plans to inherit all personnel from Hyundai Wia's Special Business Division through employment succession.
The K2 tank has firmly established itself as Hyundai Rotem's representative export weapon in name and reality. Currently, a total of 260 units are in operation domestically, comprising 100 units from the first batch, 106 units from the second batch, and 54 units from the third batch. Production is also underway for the 150th units of the fourth batch.
Adding the 180th units from Poland's first contract, approximately 440 K2 tanks are in operation domestically and abroad. The scale of contracts signed with Poland totals 441 units, including 360 tanks and 81 derivative vehicles across the first and second contracts.
Based on this, the company is also pursuing market expansion in the Middle East (Iraq), Eastern Europe (Romania), and South America (Peru). The acquisition of Hyundai Wia's Special Business Division is expected to add momentum to this trend.
Hyundai Wia explained that this transaction is a portfolio restructuring aimed at focusing on future mobility businesses. The company plans to use the secured funds for investments in new ventures. Hyundai Wia had sold its machine tool business for approximately 340 billion won in July last year. It appears the company will cultivate industrial robots, such as thermal management systems that regulate the temperature of batteries and motors, logistics robots, and unmanned parking robots, as new growth drivers.
Meanwhile, Hyundai Rotem announced on the same day that it recorded revenue of 1.6207 trillion won and an operating profit of 247.1 billion won in the third quarter last year. Revenue increased by 0.1% year-on-year, while operating profit decreased by 11.0%. The operating profit margin reached 15.3%.
As of the end of the third quarter, the order backlog was 29.142 trillion won. Order backlogs by business segment were recorded as follows: 9.5228 trillion won for the AD&RH (Aerospace, Defense & Robotics, Hydrogen) segment; 19.031 trillion won for the RS (Rail & Systems) segment; and 588.2 billion won for the EP (Eco Plant) segment.
A Hyundai Rotem official said, "We have continued solid revenue growth in line with the continuous production of defense export volumes," adding, "We plan to sustain medium- to long-term growth by promoting export diversification."
in INDUSTRY
