Australian shipbuilder Austal, which also has operations in the U.S., on Tuesday confirmed it has received an unsolicited acquisition offer from South Korean multi-industrial conglomerate Hanwha Group but said it doubts the proposal would be approved by regulators in Australia and the U.S.
Hanwha is offering $2.825 in Australian dollars per Austal share, well above the $2.20 closing price on Monday.
Austal listed the conditions the offer would be subject to including due diligence, approvals by Australia’s Foreign Investment Review Board (FIRB), the Committee on Foreign Investment in the United States (CFIUS), the U.S. Defense Counterintelligence Security Agency, Austal’s board and shareholders, and Hanwha’s board.
Austal also highlighted the Australian government’s plans announced in November 2023 to negotiate an agreement that designate the company as the country’s “strategic partner for vessels constructed in Western Australia” and to ensure Australia has “’a sovereign and enduring naval shipbuilding industry.’”
Austal said it is open to continued discussions with Hanwha if the company can “provide certainty on whether a transaction would be approved.”
Hanwha called “baseless” a “recent media report” that Australia would reject the sale of Austal to a foreign-owned company due to its defense work for the government. The company said it is “confident” FIRB would approve the deal, pointing to previous approvals for investments it has made in Australia.
“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,” David Kim, executive vice president at Hanwha, said in a statement.
Approving the acquisition will strengthen alliances, boost investment in Australia’s naval shipbuilding, bring advanced shipbuilding capabilities to Austal, and create a long-term partnership between Hanwha and Australia, Hanwha said.
Hanwha owns Hanwha Ocean, the former Daewoo Shipbuilding and Marine Engineering company in South Korea, which builds destroyers, frigates, submarines, LNG and very large crude oil carriers.
U.S. Navy Secretary Carlos Del Toro in February visited South Korean shipbuilding executives, including with Hanwha Group’s Hanwha Ocean and HD Hyundai Heavy Industries, encouraging them to invest in dual-use commercial-military shipyards in the U.S. (Defense Daily, March 1).
In the U.S., Austal USA constructs the Navy’s Independence-variant Littoral Combat Ship, the landing craft utility vessel, the Spearhead-class expeditionary fast transport, Navajo-class towing, salvage and rescue ship, the expeditionary medical ship, auxiliary floating dry dock medium, the TAGO-25 ocean surveillance ship, and the second phase of the Coast Guard’s offshore patrol cutter fleet.
Austal USA is headquartered in Mobile, Ala., where it does ship construction. The company has a drydock facilities in San Diego for small combatants and a technology center in Charlottesville, Va.
Byron Callan, a defense analyst with Capital Alpha Partners, said in a client note that given Italian company Fincantieri is building the U.S. Navy’s Constellation-class frigate in Wisconsin the CFIUS is unlikely to object to Hanwha’s proposed purchase of Austal. He also said that if the transaction is approved it highlights “how South Korea’s defense sector is globalizing.”
Hanwha is teamed with Oshkosh Corp. [OSK] in pursuit of the U.S. Army’s Optionally Manned Fighting Vehicle program and with Anduril Industries in a bid for the service’s Small Multipurpose Equipment Transport II ground robot competition.