Hyundai Rotem buys Hyundai Wia's gun business to make K2 tank main guns in-house

South Korean tank maker Hyundai Rotem will take over the defence business of its sister company Hyundai Wia for about 358.4 billion won, a deal that puts production of the main gun for the K2 battle tank under the same roof as the tank itself. The two Hyundai Motor Group affiliates signed the contract on Oct. 19 after Hyundai Rotem's board approved the purchase, according to regulatory filings reported by the Korea Times and the Chosun Ilbo.

The unit being sold is Hyundai Wia's special business division, which dates back to the company's founding in 1976. It builds large-calibre artillery, including the main guns for Hyundai Rotem's K2 tanks and the gun barrels for the K9 self-propelled howitzers made by Hanwha Aerospace. The Chosun Ilbo said the division has also developed a remotely operated weapon station that uses artificial intelligence for fire control, as well as a shipborne close-in weapon system known as CIWS-II.

The purchase covers the division's operating assets and liabilities, and BusinessKorea said it also includes its employees and intellectual property rights. The division's operating value was assessed at 480 billion won, but land and buildings worth about 117 billion won that will be leased rather than sold were left out of the price, the Chosun Ilbo reported. BusinessKorea said the final figure may still be adjusted for changes in net assets before closing. The companies aim to complete the transfer by March 31, 2027, subject to regulatory approvals and an extraordinary meeting of Hyundai Wia shareholders set for Nov. 27.

Hyundai Rotem said in its filing that the acquisition is meant to bring its defence capabilities together and make it more competitive in future weapons systems through vertical integration. The Korea Times said building both the complete K2 and its main gun should cut manufacturing costs and make the supply chain easier to manage. The paper added that owning gun-barrel technology would leave the company better placed when overseas customers ask for local production or technology transfers. BusinessKorea likewise said the move could help Hyundai Rotem meet localisation requirements in export markets and widen the range of products it can offer abroad.

The deal also stretches Hyundai Rotem's reach beyond tanks and armoured vehicles. The Chosun Ilbo said it is expected to take the company into K9 howitzer barrels and naval weapon systems, which would make Hyundai Rotem the source of a key component for a howitzer built by Hanwha Aerospace. Until now, Hyundai Rotem itself has bought its K2 main guns from Hyundai Wia.

For the wider group, the transaction gathers Hyundai Motor Group's defence work under Hyundai Rotem. Hyundai Wia will concentrate on automotive parts and future mobility, including thermal management systems for electric vehicle batteries and motors, hybrid engines and robots. BusinessKorea noted that the defence division had been a high-margin operation that contributed more than a fifth of Hyundai Wia's operating profit, leaving open how quickly its newer businesses can replace those earnings. Hyundai Rotem plans to keep all employees who move across from the division and to pursue further integration, including relocating production facilities, the outlet said.

The acquisition was disclosed on the same day as Hyundai Rotem's third-quarter results. The company reported consolidated revenue of 1.6207 trillion won, up 0.1 percent from a year earlier, while operating profit fell 11 percent to 247.1 billion won, according to the Chosun Ilbo. Over the first nine months of the year, revenue rose 11.2 percent to 4.6842 trillion won and operating profit slipped 4.7 percent to 703.7 billion won.