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Hanwha Group has recently shown renewed interest in acquiring the global shipbuilding and defense company Austal, offering over 1 billion 200 million Australian dollars (approximately 1.055 trillion 616 million won).
However, it is reported that Austal raised issues, noting the high possibility that the Australian federal government might not approve the acquisition of a defense contract business by a Korean company.
Despite this, it is anticipated that there won't be significant issues with the acquisition, given the friendly relations between the Australian and South Korean governments and Hanwha Group's substantial business dealings in Australia, including the K9 self-propelled howitzer and the Redback.
As of April 2nd, according to the defense industry, Hanwha is pushing to secure its position and grow its strategy in the global defense market. It is focusing on acquiring Austal, which has recently expressed an intention to sell, especially in the shipbuilding business in the USA and Australia.
Six months after Hanwha's initial acquisition proposal, several revised proposals have been made. When Austal raised the possibility of the Australian federal government disapproving the acquisition of an Australian defense company by a Korean company, Hanwha conducted a government approval-related due diligence through a global law firm, confirming there were no issues. Austal agreed with the due diligence results and commenced business inspection last March but unilaterally canceled the inspection scheduled one day before the agreed date.
Nonetheless, Korea is expected to become a long-term partner and ally supporting Australia's national security, potentially joining an expanded Five Eyes alliance, known as "Seven Eyes." Geopolitically, cooperation at close range is possible, making it a high-value alliance. Moreover, Hanwha, by acquiring Hanwha Ocean and becoming one of the top three shipyards in the world, has a long history and expertise in shipbuilding. It is also expected to be welcomed by the Australian government for its continuous diversification and support capabilities in shipbuilding to achieve the AUKUS (Australia, the United Kingdom, and the United States) program.
Additionally, Hanwha Group has successfully experienced FIRB approval related to the Australian defense business, including contracts for infantry fighting vehicles, self-propelled howitzers, and ammunition resupply vehicles, making significant investments in the Australian Aerospace Geelong facility.
Australian Minister Richard Marles emphasized the importance of defense cooperation with South Korea, stating that deepening the strategic partnership with South Korea is among Australia's most important tasks and is confident that the strategic defense relationship between Australia and South Korea, both mature democracies, can become stronger, offering numerous opportunities for further deepening.
As a credible acquirer, Hanwha Group offered an amount approximately 30% premium to Austal's share price, making it an attractive proposition to the existing shareholders. Hanwha has appointed the investment bank UBS as its advisor for the acquisition.
In the past three years, only 0.2% of foreign acquisitions of Australian companies were disapproved, mostly limited to hostile countries, suggesting a high likelihood of approval for Hanwha's acquisition of Austal.
Austal has recently signed an initial contract with the Australian federal government for a strategic shipbuilding agreement. If a binding contract is concluded, Austal is to build 18 steel-hulled landing craft and additional large landing ships in Henderson for the Australian Navy. The total number of ships to be delivered under this project will increase to 10, including an additional contract with the Australian Navy for two Evolved Cape-class patrol boats.
Austal's share price was recently traded at 2.20 Australian dollars (approximately 1,934.31 won), with a market value of about 800 million Australian dollars (approximately 703.384 billion won). Since the beginning of the year, the share price has risen from 1.90 Australian dollars (approximately 1,670.54 won) to a high of 2.23 Australian dollars (approximately 1,960.68 won) last month, and it is estimated to exceed 1 billion 200 million Australian dollars if orders are assumed since January.
Hanwha, as a leading global company with rich experience in the shipbuilding and marine industry, has integrated Hanwha Ocean into its group. Hanwha Ocean is developing so-called 'green solutions' as part of shipbuilding technology for energy savings and the use of environmentally friendly fuels.
Austal specializes in the design, construction, and support of defense and commercial vessels, including naval ships, high-speed ferries, offshore wind power stations, and supply vessels for oil and gas platforms. It has shipbuilding facilities in Henderson, Western Australia, and Mobile, Alabama, and builds merchant ships in Balamban, Philippines. Its U.S. business has been considered more attractive to buyers over time due to its larger scale.
Austal recorded sales of 717.7 million U.S. dollars (approximately 969.6127 billion won) over the past six months until December. This is a 7% decrease due to a reduced contribution from the Australasia region. The net profit was 12 million dollars (approximately 16.212 billion won). In the corresponding period previously, there was a loss of 7.3 million dollars (approximately 9.8623 billion won).
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