Hanwha Ocean (formerly Daewoo Shipbuilding & Marine Engineering, DSME) has announced the termination of acquisition negotiations with Australian shipbuilding group Austal, citing the failure to reach a reasonable agreement.
Recently, Hanwha Ocean stated in a statement, “The company has decided to suspend negotiations with Austal’s management and board of directors regarding the acquisition of Austal, an Australian shipbuilding and defense company, and has notified the other party of this.”
The acquisition process has had many twists and turns. In April, Austal announced that it had received a takeover offer worth A$1.02 billion (US$700 million) from Hanwha Ocean at a price of A$2.825 per share, a 28.4 percent premium to Austal’s closing price on March 29th.
However, Austal ultimately rejected Hanwha Ocean’s offer, citing difficulties in obtaining approval from Australia’s regulator, the Foreign Investment Review Board (FIRB), as well as the sensitivity of its main business. In addition, earlier this year in March, Austal had canceled a scheduled site visit by the two companies.
Although Austal rejected Hanwha Ocean’s takeover offer, Australia’s Deputy Prime Minister and Minister for Defense Richard Males said in June this year, “Hanwha Ocean’s takeover offer with Austal is ultimately an internal matter for Austal, and Austal is a privately owned company. As a government, we are not at all concerned that Hanwha Ocean is moving in that direction.” Richard Males’ comments were then interpreted as encouraging Hanwha Ocean to acquire Austal, a shot in the arm for the acquisition.
Thereafter, Austal allowed Hanwha Ocean to conduct site visits, which provided additional possibilities for the parties to reach an acquisition agreement. During this period, Austal demanded that Hanwha Ocean pay shutdown costs, which Hanwha Ocean rejected.
Austal is known to build naval vessels, high-speed ferries, and offshore vessels for the offshore wind and offshore oil and gas industries, and was recognized in November 2023 by the Australian government as a strategic shipbuilder.
Austal is also a prime contractor for the design, construction and maintenance of vessels for the U.S. Navy. Late last year, Austal USA signed a contract with the U.S. Navy for the design and construction of three expeditionary hospital ships (EMS). This means that Hanwha Ocean’s acquisition of Austal still needs to be approved by US regulators DCSA (Defense Counterintelligence and Security Agency) and CFIUS (Committee on Foreign Investment in the United States).
Nonetheless, Hanwha Ocean had been pursuing the acquisition of Austal, which operates in Australia and the U.S., believing that the acquisition of Austal’s shipbuilding business would create synergies in the defense sector. However, Hanwha Ocean ultimately decided to terminate the acquisition on the grounds that it was “unable to reach a reasonable agreement with Austal’s management and board of directors”.