Hanwha Solutions announced Friday a significant reduction in its planned rights offering, scaling it back from 2.4 trillion won to 1.8 trillion won (approximately $1.6 billion to $1.2 billion USD). This adjustment comes after intense scrutiny from South Korea’s financial regulator, the company confirmed.
The energy and chemical solutions arm of Hanwha Group confirmed in a regulatory filing that it has submitted an amended securities registration statement, detailing the reduced fundraising plan.
Under this revised rights offering plan, Hanwha Solutions will now issue 56 million new shares, a notable decrease from the initially proposed 72 million shares. Additionally, the offering price per share has been lowered to 32,400 won, down from the original 33,300 won.
Consequently, the total capital to be raised through the rights offering has been reduced by approximately 600 billion won.
Hanwha Solutions also re-evaluated and revised the intended use of the proceeds from the offering. The portion allocated for debt repayment has been trimmed to 906.7 billion won, a significant reduction from the initial plan of 1.49 trillion won. Conversely, the allocation for critical facility investments remains largely consistent at approximately 900 billion won.
The rights offering ratio has also been adjusted, decreasing to 0.2604 new shares per existing share from the prior 0.3348.
Hanwha Solutions confirmed that the offering will proceed with a primary allocation to existing shareholders, followed by a public offering for any unsubscribed shares. The subscription date is set for May 14.
This significant amendment follows an order from South Korea’s financial watchdog, the Financial Supervisory Service (FSS), issued on April 9. The FSS had instructed Hanwha Solutions to revise its securities registration statement, citing that important details were either missing or unclear, though specific reasons were not further elaborated.
The regulator’s formal request effectively suspended the original filing’s effectiveness.
Hanwha Solutions had initially announced the ambitious, large-scale rights offering in March, primarily intending to allocate nearly two-thirds of the proceeds towards debt repayment. However, this initial plan quickly faced heavy criticism from shareholders, who expressed concerns over the potential for significant dilution of existing shares with minimal allocation for future growth initiatives, as well as the abruptness of the board’s announcement.
Industry observers widely suggest that the company’s decision to scale back the offering directly responds to a combination of stringent regulatory scrutiny and significant shareholder backlash.
In a related development on Friday, Hanwha Solutions executives issued an apology for insufficient communication regarding the rights offering with its shareholders.
“We sincerely apologize for causing great concern by not communicating enough with shareholders and the market about the scale and background of the rights offering in its initial stage,” stated Nam Jung-woon, CEO of Hanwha Solutions’ chemical division, alongside Park Seung-deok, CEO of its Qcells division. They added, “We will do our best to actively communicate with shareholders and the market moving forward.”
Further demonstrating a commitment to addressing shareholder concerns, the company also announced that Hanwha Group Chair Kim Seung-youn will cease receiving compensation from Hanwha Solutions beginning in May. While continuing to oversee the company, this move is presented as the chair’s acceptance of management responsibility in light of recent events.
Hanwha Corp., which holds a substantial 36.66 percent stake in Hanwha Solutions (excluding treasury shares) as its largest shareholder, has affirmed its participation in the rights offering. It plans to subscribe for more than its full allotment, applying for up to 120 percent of the shares allocated to it through an oversubscription mechanism.
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