Hanwha Aerospace Co. is in superior discussions with Saudi Arabia over potential arms collaboration because the Center East turns into the corporate’s important focus, in accordance with the top of its international protection enterprise.
The burgeoning alternatives within the area are a significant purpose South Korea’s largest protection contractor determined to announce a share-sale plan final month to lift funds, mentioned Michael Coulter, who was named international protection president and chief govt officer at Hanwha on the finish of final yr.
“We’re in discussions both in Saudi Arabia and the United Arab Emirates right now about programs that will create capacity in the Middle East, that addresses sovereign” points, and likewise helps handle safety threats, Coulter mentioned in an interview with Bloomberg. “There’s a real opportunity for us to meet security challenges in the Middle East through local facilities.”
Hanwha has been one of many largest beneficiaries from the surge in international demand for floor weapons following the outbreak of wars in Ukraine and the Center East. The corporate’s shares have rallied virtually 30-fold over through the previous 5 years, and it’s Asia’s top-performing inventory this yr. Identified for its potential to ship weapons quicker and cheaper than rivals, the agency’s flagship weapons embody the K9 self-propelled howitzer.
The corporate’s shares fell 2.1% Tuesday whereas the benchmark Kospi was little modified.
Hanwha continues to be deciding on the precise type of its involvement in Saudi Arabia, but it surely could possibly announce an settlement later this yr, mentioned Coulter, a former U.S. navy officer.
“We have not come to full decision yet on whether it’s facility in Saudi Arabia, or a joint venture, or a partnership, or we’re supporting a Saudi defense company, so that’s that but the market demand is there,” he mentioned.
Hanwha’s overtures come as Saudi Arabia is investing trillions of {dollars} in a plan to develop the non-oil financial system, together with a purpose to localize 50% of its army spending by 2030 below the plan it has known as Imaginative and prescient 2030.
Center East arms gross sales are a delicate matter for South Korea because the nation seeks to steadiness its ties with Arab states and its relations with its sole treaty ally the U.S., which has longstanding safety relations with Israel.
Controversial sale
Hanwha earlier this month trimmed the dimensions of its deliberate share sale to 2.3 trillion received ($1.6 billion) from an authentic 3.6 trillion received, following pushback from buyers and monetary authorities. The Monetary Supervisory Service has additionally objected to its revised plan.
The choice to cut back the providing confirmed “a very responsible willingness by a company to listen to its investors and shareholders,” Coulter mentioned.
“Yes, there’s a potential for a slight dilution in the near term, but look at our track record, look at the market opportunity, we’ve walked everybody through where we’re making the investments and the return on those investments from a business standpoint,” he mentioned.
Europe plans
Hanwha can be in talks with various Western European nations about the way it might assist them enhance their arms-making capability within the face of rising international instability.
“We’re not intent on coming in and taking over and displacing European partners,” Coulter mentioned. “We’re talking with governments, but we’re also talking with industry and saying where have you invested? Where have you not invested? Where can we be a partner?”
Coulter mentioned he was optimistic the U.S. and South Korea will attain a deal that can avert a protracted commerce dispute stemming from the Trump administration’s menace of upper tariffs.
“We are very confident that the two governments are going to come to resolution,” he mentioned.
“There is a huge U.S. Army presence here. We have U.S. Navy ships in our shipyards here in Korea. So our governments are talking through that. I’m cautiously optimistic that will pan out and it won’t become a political issue.”
This story was initially featured on Fortune.com
