Hanwha makes its case for Austal acquisition

Photo: Hanwha

As we reported earlier, South Korea’s Hanwha Group has submitted an indicative offer to acquire the global business of Austal USA’s Australian parent, Austal (ASX:ASB), through 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 – AUD 2.440. Today’s range was AUD 2.320 – AUD 2.460.

In a press release today, Hanwha says that it “brings important capabilities and investment to support Austal’s business and local Australian communities while aligning with government objectives in Australia, the U.S. and South Korea.”

Hanwha dismisses as “baseless” a recent media report that “states concerns that the Australian government would not grant permission of the sale of Austal because it carries out defense contracting work for the Australian government.”

“There is no foundation of the claim that the Foreign Investment Review Board (FIRB) would reject Hanwha’s acquisition of the company,” said Hanwha executive vice president David Kim. “Hanwha is respectful of the FIRB regulatory approval process, but is confident in its ability to obtain FIRB approval for the transaction.

“Hanwha has already obtained FIRB approval for prior investments in Australia and has a proven track record of investment in Australia’s defense industrial base, being the contracted supplier of infantry fighting vehicles, self-propelled howitzers and ammunition resupply vehicles with significant investment in a Geelong manufacturing facility that employs local workers.”

Hanwha says that it is “a credible buyer with a highly competitive offer” and that its rationale for its interest in Austal includes:

Strengthening alliances: Hanwha is a known entity and respected ally to both Australia and US defense leaders with a strategic presence in the Indo-Pacific. Hanwha’s acquisition of Austal would build upon the countries’ alliances and support Australia’s national security as a partner and ally, building upon a series of relationships between key defence and security partners.

Supporting government priorities: The deal is aligned with Australian government objectives outlined in the Independent Analysis of Navy’s Surface Combatant Fleet, where Hanwha’s capabilities and investment would accelerate delivery of critical programs and allow Australia to keep sovereign shipbuilding capabilities in Henderson, Western Australia.

Austal value: Hanwha has more than 50 years of experience in shipbuilding, which would expand Austal’s growth potential and accelerate innovation (e.g. steel shipbuilding, production automation, Smart Shipyards, autonomous technology) while unlocking Austal value with increased investment and efficiencies.

Long-term partner: Hanwha is a long-term partner with the intent to invest in the business along with the workforce and communities it supports, while bringing stability to the company with long-term partnership at the forefront of decision making. With a focus on local jobs, community partnerships and economic development, Hanwha is an ideal partner for stable long-term growth compared to other ownership models.

Hanwha says that it believes an Austal acquisition would benefit numerous stakeholders, including governments, shareholders, employees, and communities and is planning to go through all the proper processes towards a successful sale.

Hanwha, founded in 1952, is a Fortune Global 500 company and South Korea’s seventh largest business group with $65.3 billion in total sales and $179.7 billion in total assets.

Hanwha Ocean (the former Daewoo Shipbuilding & Marine Engineering, acquired by the Hanwha Group last year) has 50+ years of shipbuilding experience, including a wide range of naval ships that include submarines, warships and other naval support vessels, as well as commercial vessels. Its Okpo shipyard is the second largest and one of the most efficient shipyards in the world.

AUSTAL “OPEN TO FURTHER ENGAGEMENT”

In its FSX filing yesterday, the Austal Board said “At present Austal is not satisfied that [the necessary Australian and U.S.[ 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.“

Stay tuned.