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Photo courtesy of Yonhap News |
[Alpha Biz= Kim Jisun] Hanwha Corporation, the de facto holding company of the Hanwha Group, has unveiled a record-breaking treasury share cancellation plan, the largest in its history. The company emphasized strong confidence in its shareholder return policy, describing the move as the largest treasury share cancellation since the launch of the Lee Jae-myung administration.
However, the treasury shares slated for cancellation were not repurchased from the open market. Instead, they were acquired in 2024 through the exercise of appraisal rights by shareholders who opposed the spin-off of Hanwha’s Momentum division, which operates in the secondary battery business. Under South Korea’s Capital Markets Act, such shares must be disposed of within a specified period, making their eventual cancellation or sale unavoidable.
As a result, analysts argue that Hanwha’s decision should be viewed differently from conventional treasury share cancellations, where companies actively buy back shares from the market to reduce float and enhance shareholder value. With the ruling party in the National Assembly pushing for mandatory treasury share cancellations, selling these shares into the market would likely have drawn sharp criticism. In that sense, Hanwha had little practical choice but to cancel the shares.
On January 14, Hanwha announced a plan to spin off its Tech and Life business divisions into a newly established entity through a corporate split. Alongside this move, the company revealed plans to cancel 4,450,816 treasury shares, equivalent to 5.9% of total shares outstanding, marking the largest cancellation since its founding. Historically, Hanwha has retained treasury shares without ever canceling them as part of shareholder return initiatives.
The company stated that the cancellation represents 5.9% of total outstanding shares, valued at approximately KRW 456.2 billion at market prices, and described it as the largest treasury share cancellation under the new administration. Hanwha added that the move aligns with government efforts to protect minority shareholders and promote the “KOSPI 5,000” policy, while enhancing shareholder value.
Nevertheless, this cancellation differs from the typical profit-based cancellation method. In general, companies repurchase shares within the range of distributable profits and cancel them, reducing retained earnings. Hanwha’s cancellation, by contrast, constitutes a capital reduction. Canceling the 4.45 million shares will reduce the company’s paid-in capital from KRW 474.1 billion to KRW 451.8 billion. To proceed, Hanwha plans to seek approval at its regular shareholders’ meeting in March, as capital reductions require a special resolution under Korean law.
Alphabiz Reporter Kim Jisun(stockmk2020@alphabiz.co.kr)
