Nothing going on here – Austal shares surge

By Peter Roberts

Perth international shipbuilder Austal has hosed down speculation that it could be involved in merger and acquisition activity or subject to takeover interest following a run on its shares.

The Perth company’s shares closed on the ASX last night at $2.21, having risen steadily from $1.60 in mid-May, a rise of more than 25 percent.

In a statement responding to an ASX query this morning, Austal said it was regularly involved in discussions with potential parties concerning strategic initiatives to create value for shareholders.

“While discussions may take place from time to time, there can be no certainty that any opportunity will proceed,” it said.

“Austal will keep shareholders informed.”

Austal, which makes most of its money from building warships for the US Navy as well as building patrol boats for the RAN and fast passenger ferries in Australia and South East Asia, may be relaxed, but I am not.

The company our largest locally owned listed defence manufacturer is now valued at $801 million – and a tasty takeover target to a US giant supported by the high US dollar.

At that price the company would look dirt cheap to a US shipbuilder, given its deepening relationship with the USN and hefty order book for steel and aluminium warships.

Most recently Austal won a US$113.9 million fixed price contract for detailed design of the Auxiliary General Ocean Surveillance Ship T-AGOS 25 class for the United States Navy, part of a $3.2 billion order.

The company builds two classes multi-hulled warships for the USN including its largest autonomous vessels – large catamaran transport ships.

The Labor government in Canberra has indicated it would not be particularly worried if a foreign company took over our largest listed defence manufacturer.

In an interview with @AuManufacturing in October, Defence Industry Minister Pat Conroy said he wanted to grow defence industry, including Australian owned ones.

But asked whether he was concerned about the vulnerability of Australian owned defence companies to overseas takeover he said: “My concern is not so such for the ownership structure but whether the capability resides in Australia.

“And if the ownership does change, what levers does the Australian government have to make sure those capabilities reside in Australia.

“That’s obviously easiest when they are owned by Australians but there are other ways around that.”

In other words the government would be relaxed if Austal fell into overseas hands.

Well, I wouldn’t be relaxed and would consider it a serious diminution of Australia’s indigenously owned defence sector.

This is the sector we need to focus on building, and Australian ownership of IP and manufacturing assets is the best way to ensure we have independence of action, and assurance of supply in any future conflict.

If this is a takeover bid – I hope the minister has reconsidered his view.

Further reading:
Austal snares US$3.2bn ship building contract
Austal delivers US Navy’s largest autonomous ship
Land Forces 2022 – defence industry policy under Pat Conroy, interview
Browse @AuManufacturing’s coverage of Austal here.

Picture: Austal/Mobile, Alabama shipyard