Austal confirms getting a takeover offer from Hanwha Ocean

Rumors that Australian shipbuilder Austal Limited (ASX:ASB) was the target of a takeover bid have been circulating since last July. Now, it seems, there’s some truth in one of them. In an April 1, ASX stock exchange filing, Austal (which is, of course, the parent of Austal USA) confirmed that it has confirms it received an unsolicited, conditional and non-binding indicative proposal from Korea’s Hanwha Ocean Co., Ltd under which Hanwha would acquire Austal by way of a scheme of arrangement that would see Austal shareholders receive AUD 2.825 cash per Austal share.

In ASX trading on April 1, Austal’s share was trading in a range of AUD 2.320 – $2.440.

Austal’s ASX filing says:

“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 U.S. Defense Counterintelligence and Security Agency, final approval of the Hanwha Board, the unanimous recommendation of the Austal Board and Austal shareholder approval.

“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 defense vessels for the Australian and U.S. navies and ownership clauses associated with defense contracts. Austal also notes the announcement by the Australian Government on 23 November 2023 that Austal and the [Australian] Department of Defence had executed a Memorandum of Understanding (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..

“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 U.S.A. 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.

“Austal shareholders are not required to do anything in relation to the Indicative Proposal. This ASX announcement has been approved and authorized for release by the Board of Austal Limited.”

interestingly, Hanwha Ocean (the former Daewoo Shipbuilding & Marine Engineering, acquired by the Hanwha Group last year) was one of the Korean shipbuilders visited by U.S, Secretary of the Navy Carlos Del Toro back in February when he made a pitch to leading Korean shipbuilders to establish U.S. subsidiaries and investing in shipyards in the United States.