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South Korean conglomerate Hanwha has reportedly withdrawn its billion-dollar bid for Western Australian shipbuilder Austal in a surprise move.
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Defence Connect can tonight confirm that the South Korean-based industry conglomerate has withdrawn its billion-dollar bid for ASX-listed naval and commercial shipbuilder Austal.
This decision comes following Hanwha’s approach to Austal in September 2023 and a series of three subsequent non-binding (NBIO) approaches and preliminary approvals were provided by both the United States and Australia.
In a formal piece of correspondence from Hanwha chief executive Kwon Hyek-woong, the company said, “Since submitting its first NBIO on 15 September 2023, Hanwha has sought to constructively engage with the Austal Board. We have submitted three revised NBIOs, agreed to a 12-month standstill, and conducted preliminary US and Australian regulatory approval reviews, which have clearly conveyed to you has only increased our confidence.”
Kwon’s letter went further, saying, “More recently, the Austal Board has indicated openness to granting us commercial due diligence, on the condition that Hanwha pays a termination fee if either the US or Australian regulatory authorities reject Hanwha’s acquisition of Austal.”
This allegedly comes following a series of failed attempts by the South Korean company to access Austal’s operations following over 12 months of engagement, which were then subsequently cancelled by the Australian shipbuilder.
Kwon’s letter added, “Discussions have stalled due to Austal’s insistence on Hanwha paying the US$5 million ($7.3 million) fee at any time in the transaction process if Austal forms the opinion that regulatory approval will not be obtained.
“This is unprecedented in the context of a public markets transaction, and is a wholly unreasonable condition on due diligence access,” Kwon’s letter stated.
“It is hard to arrive at any other conclusion than that the Austal Board has no desire to determine whether an offer that is capable of being recommended to shareholders could be concluded,” the letter stated.
This parting collapse in South Korea’s bid for Austal comes despite a seeming vote of confidence by Deputy Prime Minister and Defence Minister Richard Marles during his meeting with South Korean Defence Minister Shin Won-sik at the 2+2 meetings on 1 May 2024, where he said, “They [Hanwha] are a private company. From the government’s perspective, we don’t have any concern about Hanwha moving in this direction. We have identified Austal as a strategic shipbuilder for Australia in WA.”
The Deputy Prime Minister’s comments were reinforced by US Navy Secretary Carlos Del Toro, who, in March this year, reinforced the high level of comfort within the US for South Korean defence industry like Hanwha to play a greater role in helping to strengthen the industrial bases of the US and its Indo-Pacific allies more broadly.
Secretary Del Toro said at the time, “As I saw firsthand during my shipyard visits in Korea this week, Hanwha and Hyundai set the global industry standard. I could not be more excited at the prospect of these companies bringing their expertise, their technology, and their cutting-edge best practices to American shores.
“As world-class leaders in the global shipbuilding business, they are poised to energise the US shipbuilding marketplace with fresh competition, renowned innovation, and unrivalled industrial capacity,” Secretary Del Toro said of the South Korean shipbuilders.
This approach has its foundations in Secretary Del Toro’s calls for a novel approach to maritime statecraft set out in a speech to the Harvard Kennedy School in September 2023, where he laid the foundation for this approach, saying, “[the US maritime industry] is ripe with opportunity to partner with a greater number of shipbuilders here in the US and with our closest allies overseas, including Japan and South Korea”.
An Austal spokesperson said, “When Austal informed its shareholders in April that it had received an indicative, conditional, non-binding offer from Hanwha, the Company was very clear that the Austal board and advisers were not satisfied that mandatory approvals for the transaction to proceed could be secured by Hanwha. Hanwha’s letter effectively confirms this evaluation.”
