Korea’s Hanwha abandons takeover of Austal – media reports

By Peter Roberts

Korea’s Hanwha defence group has abandoned its takeover bid for Australia’s most successful indigenous owned defence manufacturer Austal, according to media reports this morning.

The takeover was ended in a letter to Austal from Hanwha Ocean CEO Hyek Woong Kwon titled ‘Termination of discussions with Austal’.

The company blamed Austal’s ‘insistence’ that it commit to paying $5 million to Austal should the deal not achieve regulatory approval during what would be a protracted approval process.

Kwon said: “This is unprecedented in the context of a public markets transaction, and is a wholly unreasonable condition on due diligence access.”

Kwon also said: “Austal, after first agreeing to provide site visit access, subsequently cancelled without prior notice or explanation two days before the visits were scheduled.”

Austal believes it clearly indicated to Hanwha its view on the likelihood of the takeover getting regulatory approval.

An Austal spokesperson said: “When Austal informed it shareholders in April that it had received an indicative, conditional, non-binding offer from Hanwha, the company was very clear that the Austal board and advisers were not satisfied that mandatory approvals for the transaction to proceed could be secured by Hanwha. Hanwha’s letter effectively confirms this evaluation.”

Hanwha announced it was interested in Austal in April, and since then has appeared to get the approval of federal defence minister Richard Marles.

As @AuManufacturing has argued, this attitude is at odds with federal policies to build up and support Australia’s indigenous defence companies.

Since the original bid was announced shareholders have rallied behind Austal, pushing its market valuation on the ASX up from around $700 million to $1 billion earlier this week.

However Austal has also won a series of lucrative grants from the US government and nuclear submarine builder General Dynamics Boat to invest in facilities in the United States to build submarine modules and components.

Hanwha’s decision now gives Australia the opportunity to formalise its support for a company which is to manufacture modules for Australia’s own nuclear submarines to be built in the US.

This also puts Austal in line for another intriguing opportunity – the potential to merge Austal and government owned ASC to create a single, powerful Australian defence shipbuilder.

The public could have confidence in such a company to successfully build AUKUS-SSN nuclear powered submarines in Adelaide following on from the US vessels.

ASC and BAE Systems Australia have previously been identified as the builders of Australia’s nuclear powered submarine fleet.

Further reading:
US submarine build contracts should end talk of selling off Austal
Hanwha bids to take Austal into foreign ownership
Marles would let Austal fall into overseas hands – I would not

Picture: Austal/Austal built USS Canberra visits Sydney