SHIPBUILDER Austal has rejected a c.$1 billion takeover proposal from South Korea’s Hanwha, citing the unlikelihood of obtaining regulatory and government approvals.

This morning [2 April] Austal confirmed it has received an unsolicited, conditional and non-binding indicative proposal from Hanwha Ocean Co Ltd to acquire the company by way of a scheme of arrangement. Under
the Indicative Proposal, Austal shareholders would receive $2.825 cash per Austal share.

Hanwha Ocean is the former Daewoo Shipbuilding & Marine Engineering Co, established in 1973 and part of the Hanwha Group since May 2023. The Group has a diversified business portfolio covering green energy; materials; aerospace, ocean & mechatronics; finance; and retail & services and was founded in 1952.  

“Hanwha’s Indicative Proposal is subject to numerous conditions, including due diligence, various regulatory approvals including 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, final approval of the Hanwha Board, the unanimous recommendation of the Austal Board and Austal shareholder approval,” the company said an ASX announcement.

“Austal invests considerable time and resources into deciding whether it should grant a potential purchaser access to the company’s otherwise confidential detailed financial records, forecasts and contracts as part of a due diligence process.

“In doing so, it assesses a range of factors, including but not limited to the potential for shareholder value creation, competition concerns and a potential purchaser’s ability to ultimately complete a transaction (which would include necessary government approvals).

“This latter consideration is particularly relevant in relation to the proposal from Hanwha, given Austal’s position as the designer and builder of defence vessels for the Australian and US navies and ownership clauses
associated with defence contracts.

“Austal also notes the announcement by the Australian Government on 23 November 2023 that Austal and the Department of Defence had executed a 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.

“In announcing the MoU for the SSA, the Commonwealth Department of Defence noted that ‘a sovereign and enduring naval shipbuilding and sustainment industry at Henderson is central to the Government’s commitment to ensuring continuous naval shipbuilding in Australia and delivering the capabilities needed to keep Australians safe’.”

Austal said its board, together with its advisers, had considered the Indicative Proposal in detail and engaged with Hanwha in relation to whether the transaction described in the Indicative Proposal would obtain the relevant regulatory approvals in Australia and the USA to enable it to proceed:

“At present Austal is not satisfied that these mandatory approvals would be secured, however the company is open to further engagement if Hanwha is able to provide certainty on whether a transaction would be approved.”

Rumours of Hanwha’s interest in Austal began to emerge in July 2023 but were met with scepticism given the WA’s company’s relationship with defence forces, especially in the USA.

Austal said shareholders are not required to do anything in relation to the Indicative Proposal.