Hanwha Group is working to consolidate its position in the shipbuilding industry, including the U.S. naval market, and has again shown interest in Australian Shipbuilding & Repair Group (ASRG) Austal. Six months after announcing the termination of negotiations, Hanwha Group has restarted its acquisition of Austal, reportedly aiming to use Austal to expand its position in the U.S. shipbuilding industry.
According to the Financial Supervisory Service electronic disclosure system (DART) on the 18th that Hanwha Aerospace and Hanwha System will participate in the third-party distribution of paid-in capital conducted by Australian entity HAA No. 1. Hanwha Aerospace and Hanwha System’s investment in HAA No. 1 totaled 337.8 billion won, of which approximately 168.7 billion won is expected to be used for the acquisition of Austal’s 9.9 percent stake.
According to Korea Investment & Securities and iM Securities, if HAA No.1 utilizes its remaining funds to purchase more Austal shares, it will increase its shareholding to 19.9 percent at a price of A$4.45 per share, taking into account the management rights premium. HAA No.1 has now applied to the Australian regulator, the Foreign Investment Review Board (FIRB), for a review of the additional shareholding.
Hanwha Group intends to become an investor holding a 19.9% stake in Austal, according to a filing with FIRB. Analysts say it’s a shrewd move that could quickly deepen the relationship without having to spend time on a fresh takeover bid, as well as passing the first level of scrutiny by Australian regulators.
In April 2024, Hanwha Ocean, a shipbuilding company of the Hanwha Group, made a public offer to acquire Austal for A$1.02 billion at a price of A$2.825 per share, a 28.4% premium to Austal’s closing price on March 29th. However, Austal chose to reject the offer, citing difficulties in obtaining FIRB approval and the sensitivity of its main business. After months of negotiations between the two sides, Hanwha Ocean announced the termination of acquisition talks with Austal in October last year, citing the failure to reach a reasonable agreement.
Despite this, Hanwha Group has been committed to seeking to acquire Austal, which operates in Australia and the United States. Six months after announcing the termination of negotiations, Hanwha Group is making another move on Austal by changing the acquirer and equity.
South Korean securities firms believe that Hanwha Group’s strategic move to hold on to Austal is ultimately aimed at the U.S. shipbuilding business rather than the local Australian business. Austal is considering using the funds raised to expand its shipbuilding facilities at its Mobile Shipyard , Alabama, U.S. shipyard.
Kang Kyung-tae, a researcher at Korea Investment & Securities, noted, “Austal USA’s Mobile Shipyard, where the U.S. Navy’s Littoral Combat Ship is being built, and Hanwha Ocean’s shareholders (Hanwha Aerospace and Hanwha Systems) are working together to support the addition of a shipbuilding facility in the U.S. The local U.S. shipyard will be used for the construction of merchant vessels, while the Mobile shipyard will be used for the construction of military vessels.”
iM Securities said the investment underscores Hanwha Group’s sincere interest in the U.S. marine business. However, the agency expressed some surprise that Hanwha Ocean was not included among the acquirers and said, “Considering that Hanwha Ocean is more likely to contribute during Austal’s operations than Hanwha Aerospace and Hanwha Systems, an explanation from Hanwha Group seems necessary.”
It is understood that Austal has a market share of 40% to 60% in the field of small surface combat vessels and logistics support vessels in the U.S., ranking first. The company has shipyards in Mobile, Alabama and San Diego, California, as well as in Australia, the Philippines and Vietnam. The company has recently emphasized its fundraising efforts to support further expansion of its U.S. operations. Austal’s order book is valued at $9 billion, the report said.
Hanwha Group believes that the acquisition of Austal’s shipbuilding business will create synergies in the defense sector. Austal is one of the top four suppliers of direct-built U.S. vessels (the other three are Hutchison Ingalls, Lockheed Martin, and Fincantieri), and Hanwha Group “plans to strengthen its position as a key player in the global shipbuilding and defense industry with this investment. ” In addition to military vessels, Austal also builds high-speed ferries, offshore wind farm vessels and oil and gas platforms.
As part of its overseas expansion, in addition to its investment in Austal, Hanwha Group has completed the acquisition of Philly Shipyard in the U.S. by the end of 2024. Philly Shipyard was previously a U.S. state-owned shipyard, which was converted to a commercial shipyard in 1998, with the Norwegian Aker Group as its largest shareholder with a 57.6% stake.Philly Shipyard mainly builds Jones Act-compliant merchant vessels. Since 2003, the shipyard has built and delivered more than 50 percent of the U.S. Jones Act-compliant large commercial vessels, including product tankers and container ships. Its core business also includes the construction and repair and conversion of ships, business vessels and offshore wind farm vessels.