Hanwha bids to take Austal into foreign ownership

By Peter Roberts

Korean defence group Hanwha has made a bid to buy one of the few Australian-owned defence prime contractors, shipbuilder Austal, and take it into foreign control.

The bid was confirmed this morning by the Perth shipbuilder, which has expended from aluminium ferry building to become a major defence shipbuilder in Australia and the United States.

The bid of $2.825 cash per Austal share compares to the $2.20 last achieved for the company’s stock on the ASX.

It is also subject to numerous conditions, including regulatory approvals from Australia’s Foreign Investment Review Board (FIRB), the Committee on Foreign Investment in the United States (CFIUS) and the US Defense Counterintelligence and Security Agency.

Such a bid was only a matter of time because Austal – like other Australian owned defence manufacturers – is severely undervalued on the ASX.

In June, 2o23 @AuManufacturing reported Austal’s surging share price, drawing denials of any takeover attempt in the wings.

Austal, which has numerous contracts to build aluminium and steel warships here and at its Mobile, Alabama shipyard (pictured) in the US, is valued at $797 million on the ASX – a tiny figure for any major multi-national.

Australia’s FIRB is unlikely to oppose the sale, as it generally takes action when a takeover threatens to increase market concentration.

It is unclear what the federal government’s attitude is towards protecting local companies from takeover – most recently it let defence radio manufacturer Barrett Communications be taken over by Motorola.

There is however a precedent for keeping such a vital piece of our defence industry in local leadership and management – in 2023 Canberra nationalised phased array radar manufacture CEA Technologies to keep its technology under Australian control.

In a statement to investors this morning Austal noted the announcement by the Australian Government on 23 November 2023 that Austal and the Department of Defence had executed a Memorandum of Understanding (MoU) to negotiate a Strategic Shipbuilding Agreement (SSA), under which Austal would be appointed as the Commonwealth’s strategic partner for vessels to be constructed in Western Australia.

This suggests there is already government backing for the company’s viability.

Austal is built on a trove of valuable IP in ship design and modular ship construction – the track record of foreign takeover is that this IP is immediately shipped overseas.

Austal itself fended off the takeover offer after engaging with the bidder.

The company concluded that at present it was not satisfied that mandatory approvals for the takeover would be secured by Hanwha.

Austal said: “However the company is open to further engagement if Hanwha is able to provide certainty on whether a transaction would be approved.”

Further reading:
Nothing going on here – Austal shares surge
Motorola pounces on Barrett Communications
Government nationalises defence tech firm CEA Technologies
Defence ensures future of Austal and its Henderson shipyard

Picture: Austal/Mobile, Alabama shipyard