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West Australia-based naval and commercial shipbuilder Austal has poured cold water on an indicative offer by South Korean industrial powerhouse Hanwha Group to acquire its global business.
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The deal, subject to the appropriate due diligence and Foreign Investment Review Board (FIRB) approvals, was rejected by Austal in an official statement on 2 April.
“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,” Austal said in a statement on 2 April.
“The Austal Board, together with its advisers, has 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.”
In addition, Austal raised concerns that the company’s position as the designer and builder of defence vessels for Australian and US navies under defence contracts would limit the prospect of approval.
In particular, it outlined the recent announcement by the Australian government on 23 November 2023 that Austal and the Department of Defence had executed a memorandum of understanding to negotiate a Strategic Shipbuilding Agreement, under which Austal would be appointed as the Commonwealth’s strategic partner for vessels to be constructed in Western Australia.
David Kim, executive vice-president at Hanwha, said the company is respectful of the FIRB regulatory approval process and is confident in its ability to obtain FIRB approval for the transaction.
Hanwha stated that a recent media report, which stated concerns that the Australian government would not grant permission of the sale of Austal because it carries out defence contracting work for the Australian government, is baseless.
Matt Thistlethwaite, Assistant Minister for Defence, Assistant Minister for Veterans’ Affairs and Assistant Minister for the Republic, speaking to ABC’s Afternoon Briefing on 2 April, said ministers had been issued advice regarding the possible sale.
“I have taken some advice on this, and the advice is that we shouldn’t be commenting on it at this stage,” he said.
“A potential transaction between two corporations, and it’s not appropriate for me to comment on that at this stage.
“I will say that Austal is an Australian-based company that produces very, very high quality and reliable military hardware, and indeed, domestic shipping as well.
“I think that it’s a testament to the skill and competence that we have here in Australia. Austal produced the Admiral Class and Cape Class patrol vessels for Australia.
“They’ve produced the littoral combat vessels for the United States military. And I think it’s a classic example of why we have every confidence in Australian industry being able to deliver on the government’s very ambitious surface fleet combat program and, of course, AUKUS into the future.
“Of course, we want to make sure that we maintain sovereign capability here in Australia in all facets of military design and delivery of important projects and hardware into the future. And that’s simply not confined to this particular company. That’s something that we hope is a characteristic of Australian defence and industry moving forward.”
