Hanwha Group Co.'s takeover of Samsung affiliates is expected to give a turbo boost to its defense and chemical businesses to become leaders in their respective industries and advance the conglomerate's rankings, market watchers said Wednesday.
   
Hanwha Group struck a deal to buy controlling stakes in four chemical and defense firms of Samsung Group for 1.9 trillion won ($1.72 billion). For Samsung, the deal allows the country's biggest family-run conglomerate to shed non-core businesses and prepare leadership transfer from ailing Samsung Group chairman Lee Kun-hee to his three children. For Hanwha, the deal buttresses the defense business that the group was built on.
   
Hanwha will acquire a 32.4 percent stake in defense unit Samsung Techwin Co, which owns half of shares in Samsung Thales Co., a joint venture with France's Thales International. The acquisition includes a 10 percent stake in Korea Aerospace Industries Co. (KAI), the nation's sole aircraft manufacturer and top defense contractor by sales.
   
Hanwha's chemical affiliates, Hanwha Chemical Corp. and Hanwha Energy Corp., will purchase a 57.6 percent stake in Samsung General Chemicals Co., which also has a 50 percent stake in Samsung Total Petrochemicals Co., a joint oil refinery with France's Total International.
  
"Through this M&A, Hanwha Group will be able to have economies of scale and elevate defense and petrochemical businesses, which have been the group's backbone for the past 60 years, to become the nation's industry leaders," Hanwha Group said in a release. "We reorganized the mid- to long-term business structure through this deal and paved the way for major sectors to grow into global players." 
  
When combined with Samsung's defense units, Hanwha Group's defense sales is expected to reach 2.6 trillion won, a sharp rise from 1.18 trillion won in 2013. Sales of Hanwha Chemical, the group's cash cow, will also increase to 18 trillion won from 4.1 trillion won after taking over two Samsung chemical firms. 
   
When the deal is completed next year, Hanwha will become South Korea's ninth-largest business group, up a place from the current ranking. 
   
Starting as a munition manufacturer in 1952, Hanwha Group has reached out to other businesses ranging from petrochemical and financial to leisure and solar through a series of M&As.
   
"Combining Samsung Techwin's expertise in aerial engine and Hanwha's knowhow in missile and unmanned aerial vehicles would create synergy in the aerospace sector," Kim Ik-sang, an analyst at HI Investment Securities, said. "Hanwha will also be able to build an integrated ground-based weapon system by combining armored vehicles, multiple-rocket launchers and the K-9 self-propelled howitzers."
   
Hanwha, which has mainly focused on guided weapons systems, will benefit from Samsung Techwin's know-how in surveillance and reconnaissance technology to develop advanced artillery and rocket systems.
   
"In light of the acquisition of Samsung Techwin and Samsung Thales, Hanwha has made an ideal defense business portfolio, expanding from ammunition and precision-guided weapons to self-propelled howitzers, aerial and naval engines as well as radars," the company said. "We plan to establish a comprehensive defense-business portfolio to expand market presence and seek synergy in the precision machinery sector."
   
Through the deal, Hanwha will also take over Samsung Techwin's
10 percent stake in KAI, raising hope that it may seek its foothold in the aerospace industry. 
   
Samsung Techwin produces engines for FA-50 light attackers, as well as Korea Utility Helicopter (KUH). Samsung Thales is a mass producer of military goods, such as thermal imagery devices.
   
In a separate statement, Hanwha Chemical said it hopes to diversify its product lineup and expand its competitiveness in the petrochemical sector through the deal to secure a stable source of profit. (Yonhap)