Australian shipbuilding group Austal said on Tuesday (April 2) that it has rejected a takeover offer worth A$1.02 billion ($662 million/about 4.789 billion yuan) from South Korean shipbuilder Hanwha Ocean (formerly Daewoo Shipbuilding & Marine Engineering). The reason is that Austal’s business is sensitive and the offer is unlikely to be approved by Australian and US regulators.
Before the tender, Austal’s market capitalization was close to A$800 million.Austal has received a bid of A$2.825 a share, a premium of 28.4% to Austal’s last closing price.Austal’s shares were up 8.2 percent in early trading, while Australian stock market gauge S&P/ASX 200 index AXJO was flat.
In November 2023, Austal was selected as a strategic shipbuilder through a preliminary agreement with the Australian government. Austal is also a prime contractor for the design, construction and maintenance of ships for the U.S. Navy. Late last year, Austal USA also signed a contract with the U.S. Navy for the design and construction of three Expeditionary Hospital Ships (EMS).
In this situation, Austal believes it is unlikely that Hanwha Ocean’s current bid proposal for 042660.KS will be approved by Australian and overseas regulators. The approvals needed would include Australia’s Foreign Investment Review Board (FIRB), the Committee on Foreign Investment in the U.S. (CFIUS) and the U.S. Defense Counterintelligence and Security Agency.
As the seventh-largest conglomerate in South Korea, Hanwha Group has 80 trillion won ($59.11 billion) in assets across the energy, defense and financial sectors. Hanwha Group said it is willing to accept all reasonable conditions to get approval from FIRB. A global law firm has advised FIUS that it should not oppose the deal.
A spokesman for Hanwha Group said, “Austal is a national asset and therefore can only be sold to companies within the AUKUS alliance countries (U.S.-U.K.-Australia). However, South Korea maintains close military cooperation with the U.S. and Australia, including conducting numerous joint exercises, as South Korea is an important ally of both countries.”
As a designer and builder of defense vessels for the Australian and U.S. navies, as well as ownership terms associated with defense contracts, Austal believes that the Australian government’s approval is particularly relevant to Hanwha Group’s proposal. And in a statement, it noted that “the company is open to further engagement if Hanwha is able to provide certainty on whether a transaction would be approved.”
