South Korea’s large conglomerate Hanwha Group that took over defense units from Samsung Group is gearing up for another round of shopping spree for its campaign to become a major on the global defense market by planning a near $1 billion acquisition of a U.S. engine parts maker in the second half.

According to sources, Hanwha Group is eyeing a U.S. company because the local aviation market is too small. An estimate by Bloomberg L.P. puts Korea’s aircraft manufacturing market at $270 million, a mere 0.6 percent of the global market. “We plan to acquire a top global engine company to gain the upper hand in the global market,” said a high-ranking official of the group.

Global engine companies such as U.S.-based General Electric, U.K-based Rolls-Royce Motor Cars and U.S.-based Pratt & Whitney get supplies from a selective pool through preliminary contracts such as Risk and Revenue Sharing Program (RSP). The company Hanwha is hoping to buy is a secondary supplier to global major companies. “Ultimately, we hope to secure technology in making turbine, a core part of an engine, through M&As,” said the official.

Hanwha had invested heavily to build a broad lineup in making defense supplies from ammunition to radar businesses. The group in 2014 bought Samsung Techwin manufacturing artillery weapons and engines and Samsung Thales specializing in radars. It has recently acquired Doosan Group’s defense unit Doosan DST, now Hanwha Defense, to have the antiaircraft weapon system and production ability of armored vehicle production. The group chairman Kim Seung-youn is keen to build the defense operation that gave birth to the Hanwha corporate name.

In 2014, the defense unit of Hanwha Group recorded 124.3 billion won in operating profit and 1.24 trillion won in sales but, with Samsung Thales and Samsung Techwin added later in the year, its annual sales more than tripled to 3.94 trillion won last year. The addition of Hanwha Defense would likely push sales of the defense unit beyond 4 trillion won this year. Sales of Hanwha Defense came to 693.2 billion won last year. The group plans to export its artillery weapons equipped with the antiaircraft weapon system.

By Kim Jung-hwan

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