Hanwha Group’s planned acquisition of Daewoo Shipbuilding and Marine Engineering, the nation’s No. 2 shipbuilder, is once again fueling speculation over its possible attempt to take over Korea Aerospace Industries, the sole aircraft maker here that would complete the conglomerate’s vision to become the Korean version of Lockheed Martin.

The rumor of Hanwha looking into buying the state-run Export-Import Bank of Korea’s 26.41 percent stake in KAI began late September after it signed a conditional memorandum of understanding to acquire DSME’s controlling stake at 49.3 percent for 2 trillion won ($1.6 billion).

According to the rumored message that went viral among investors, Hanwha initially wanted to take over DSME’s certain business only but the government demanded a total buyout. Hanwha then pledged to do so only if a KAI acquisition would be made available by the government. The two sides reached an agreement. Hanwha was now expected to begin the takeover process of KAI after it acquires DSME this year.

All three parties denied the rumor. Hanwha said it has not reviewed such a buyout plan. KAI released a rare statement to refute a rumored report that said officials from Hanwha and KAI met multiple times to discuss the practically state-owned KAI’s privatization. Eximbank Chairman and President Yoon Hee-sung made it clear that there were no plans to sell the bank’s stake in KAI during an audit at the National Assembly on Oct. 19.

However, now that the DSME deal has been signed on Dec. 16, industry sources say the rumor has come back again.

“Although Hanwha still has to go through the administrative processes and receive approvals from the Korean and foreign fair trade authorities, it looks like there won’t be many obstacles. Once the acquisition is completed, Hanwha is probably going to think about what it will look for to take the next big leap,” an analyst at a local securities firm told The Korea Herald on condition of anonymity.

Pointing out that Hanwha’s all defense businesses had been put together under Hanwha Aerospace in July, the analyst said the DSME acquisition will make the group a total defense firm covering the land, the sea and the air.

“Getting KAI’s technology of fighter jets, helicopters and aerospace could help Hanwha reach its goal of becoming the Korean Lockheed Martin,” the analyst added.

As Hanwha prepares for leadership succession from Chairman Kim Seung-youn to his eldest son Kim Dong-kwan, the group’s vice chairman and CEO of Hanwha Solutions, another industry source said it would make sense for Hanwha to go after KAI to boost the apparent heir’s climb to the chairman position in the long term.

“If you think about Korea’s space industry shifting gears from the government-led area to the private-oriented sector, Hanwha is the country’s leading aerospace company. Chairman Kim’s eldest son is leading the group-wide committee to nurture its space businesses,” said the source who also wished to be unnamed.

The source, however, noted that Hanwha’s priority right now is to face the tough task of normalizing DSME’s continued losses and reviving the financial status of the shipbuilder that has logged an accumulative sales loss of almost 1.2 trillion won over the first three quarters this year.

“Hanwha is already spending 2 trillion won for the acquisition of DSME. It will need more investment to normalize the shipbuilder’s financial structure. Eximbank’s stake in KAI is worth about 1.25 trillion won. It appears difficult for Hanwha to raise enough amount of cash in the near future,” the source said.

According to a Hanwha official, the conglomerate does not have an interest in buying Eximbank’s stake in KAI, adding that the rumor has been around for one to two years already. Hanwha is the seventh-largest family-run conglomerate in Korea with a total market capitalization estimated at about 80 trillion won. With a possible acquisition of KAI, it could outpace steel giant Posco to become the sixth-largest business group.

KAI, the country’s sole fighter jet manufacturer, has also maintained a firm stance to turn down any possibilities of handing over its ownership.

Kang Goo-young, CEO of KAI, said the company should not be bought out by Hanwha and added that he believed it should not be acquired by any private firms in a press conference with local reporters held at the KAI headquarters in South Gyeongsang Province on Dec. 20.

“The weapons KAI makes account for 60 percent of the aerial weapons system of the Air Force, the Navy and the Army. The figure will go up to 70 percent or higher in 10 years. It is very risky to entrust private companies with core forces that have an essential impact on the outcome of the war,” said Kang.