Hanwha Group (Hanwha) has submitted an indicative offer to the Australia-headquartered Austal board to acquire the global business of Austal, via a scheme of arrangement, subject to satisfactory due diligence.
Hanwha brings important capabilities and investment to support Austal’s business and local Australian communities while aligning with government objectives in Australia, the US and South Korea.
A recent media report which states concerns that the Australian government would not grant permission of the sale of Austal because it carries out defence contracting work for the Australian government is baseless.
“There is no foundation of the claim that the Foreign Investment Review Board (FIRB) would reject Hanwha’s acquisition of the company,” David Kim, Executive Vice President at Hanwha said. Hanwha is respectful of the FIRB regulatory approval process, but is confident in its ability to obtain FIRB approval for the transaction.
“Hanwha has already obtained FIRB approval for prior investments in Australia and has a proven track record of investment in Australia’s defence industrial base, being the contracted supplier of infantry fighting vehicles, self-propelled howitzers and ammunition resupply vehicles with significant investment in a Geelong manufacturing facility that employs local workers,” Kim said.
Hanwha is a credible buyer with a highly competitive offer. The company’s rationale for the interest in Austal includes:
- Strengthening alliances: Hanwha is a known entity and respected ally to both Australia and US defence leaders with a strategic presence in the Indo-Pacific. Hanwha’s acquisition of Austal would build upon the countries’ alliances and support Australia’s national security as a partner and ally, building upon a series of relationships between key defence and security partners.
- Supporting government priorities: The deal is aligned with Australian government objectives outlined in the Independent Analysis of Navy’s Surface Combatant Fleet, where Hanwha’s capabilities and investment would accelerate delivery of critical programs and allow Australia to keep sovereign shipbuilding capabilities in Henderson, WA.
- Austal value: Hanwha has more than 50 years of experience in shipbuilding, which would expand Austal’s growth potential and accelerate innovation (e.g. steel
- While unlocking Austal value with increased investment and efficiencies.
- Long-term partner: Hanwha is a long-term partner with the intent to invest in the business along with the workforce and communities it supports, while bringing stability to the company with long-term partnership at the forefront of decision making. With a focus on local jobs, community partnerships and economic development, Hanwha is an ideal partner for stable long-term growth compared to other ownership models.
Hanwha believes an Austal acquisition would benefit numerous stakeholders, including governments, shareholders, employees, and communities and is planning to go through all the proper processes towards a successful sale.
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how can we have an Australian owned supply chain if we sell companies to foreigners. We own too little already. Although with shareholders like this one wonders if it is Australian any more
Norges Bank Investment Management (NBIM) 6,327,499 1.75 -772,922 12/31/23
Onyx (WA) Pty. Ltd. 5,600,000 1.55 — 6/30/23
Vanguard Investments Australia Ltd. 4,703,051 1.30 6,293 2/29/24
BlackRock Institutional Trust Company, N.A. 4
Regardless of Australian projects Austal is involved.
If the possible buy out involves Hanwha Group taking over Austal USA then this may lead to US industrial and government opposition. Also the US may influence the Australian Government not to permit a Hanwha takeover.
At https://en.wikipedia.org/wiki/Austal_USA “Austal USA is an American shipbuilder based on Blakeley Island in Mobile, Alabama. It is a subsidiary of the Australian shipbuilder Austal, operating under a Special Security Arrangement which allows it to work independently and separately on some of the most sensitive United States defense programs despite its foreign ownership.”
One particularly sensitive Austal USA activity is https://usa.austal.com/news/Virginia-class-submarine-modules :
“MOBILE, Ala. – Austal USA received an order for the manufacture and outfitting of three electronic deck modules for the Virginia-class submarine program. The order, valued at $10.6 million, was issued by prime contractor General Dynamics Electric Boat. Construction will begin in fall 2023 and the modules are scheduled to be delivered to Electric Boat by the middle of 2025.”
I don’t think the US would permit South Korea’s Hanwha to have access to US crown jewel weapon secrets.
yes i see your point
My understanding is that Hanwha have offered to buy all of Austal – including the US subsidiary. I have no real idea how the US will react. It has a well deserved reputation for parochialism – but remember that it is a Fincantierri subsidiary that is building the Constellation class frigates. There might be a view that changing from an Australian-owned contractor to a South Korean-owned contractor is no big deal.
Now that Austal has been named by the Govt as the preferred shipyard for tier 2 combatants, patrol craft and likely other support vessels both small and large, it’s not surprising that the likes of Hanwha are circling. An almost guaranteed order book of military vessels for what could easily be the next 20 plus years is enticing. Add to that the other international operations that service the US military and other civilian markets with ferries etc.
With a South Korean examplar vessel shortlisted for the GP Frigate program, Hanwha may well think owning the shipbuilder could give them the potential winning edge. However, with that in mind, would to that be a conflict of interest, or at very least an unfair advantage that would have to be excluded from any competition.
It will be interesting to watch and see if the Government has a say at some point.
I assume the purchase will need to be approved by the Foreign Investment Review Board and they might rule against, if Defence objects for the reasons you outline.
especially if there’s USA opposition, as pointed out by Pete