Austal knocks back $1bn Korean takeover offer

Defence industry shipbuilder Austal has confirmed it has received an unsolicited takeover offer from South Korean firm Hanwha Ocean Co, but has poured cold water on a deal for now.

The $2.825 per share offer from Hanwha represents a significant premium to Austal’s previous closing price of $2.20 per share – valuing the company at over $1 billion – but is complicated by the strict security measures that govern defence industry manufacturing.

Late last year, Austal secured a memorandum of understanding with the Australian Department of Defence to negotiate an agreement that would make it the Commonwealth’s strategic shipbuilding partner in Western Australia.

Austal already designs and builds defence vessels for the Australian and US navies, and in a statement this morning the company flagged doubt over its ability to get a takeover approved in either jurisdiction.

The company said it had not shared otherwise confidential financial records, forecasts and contracts as part of a due diligence process because of uncertainty over whether regulatory approvals would be received in the US or Australia.

Any deal for Austal would be subject to approvals from the Foreign Investment Review Board, the Committee on Foreign Investment in the US and the US Defense Counterintelligence and Security Agency.

It would also require final approval from the Hanwha board, the unanimous recommendation of Austal’s board and Austal shareholder approval.

“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,” Austal said.  

It instructed shareholders not to act on the takeover offer.

Austal’s Henderson facility in WA is in the box seat to win sustained shipbuilding work as a result of last year’s MoU, after the federal government committed in February to build the nation’s largest naval surface combat fleet since World War II.

The company praised the certainty offered by the commitment, and said it expected to be able to increase its local workforce by up to 1,200 people as a result.

In December, Austal was awarded a $1.3 billion contract for expeditionary medical ships from the US Navy.

The US market accounted for 81 per cent of Austal’s revenue for the half year to December 31.

The Australia-based business, founded at Henderson in 1988, is currently the only foreign-owned prime contractor designing constructing and sustaining ships for the US Navy.

Hanwha is one of South Korea’s largest shipbuilders.

The company was the target of cyber-attacks believed to have come from North Korea in 2017 and 2021.

Austal shares were up almost 11 per cent this morning, trading at $2.44 at 9am WST.