Acquisition of Philly Shipyard, the largest dock in the region... 'First step' in securing US outpost Export territory expansion plan continues... beyond MRO to ship construction
“We have not given up on acquiring Austal. “We are reviewing various aspects to pursue the contract.”
Recently, a Hanwha Group official responded to the question, “Has the goal of securing production facilities in the United States been achieved through the acquisition of the Philly Shipyard?” According to the industry on the 5th, Hanwha Group signed a contract on the 20th of last month to acquire a 100% stake in the Philly Shipyard in Philadelphia, USA, for $100 million (about 139.1 billion won).
Philly Shipyard was a U.S.-based subsidiary of Norway's Aker, but was transferred to Hanwha. This is the first acquisition of a U.S. shipyard by a domestic shipbuilder. The strategy is to embrace not only the Philly Shipyard but also the American shipyard owned by Austal through the acquisition of Austal in Australia.
The reason Hanwha Group is putting effort into securing local production facilities in the United States is to win the MRO (maintenance, repair, and overhaul) business for U.S. ships. The Jones Act allows commercial operation within the country only for ships built or substantially modified in the United States. With this acquisition, Hanwha is evaluated to have established a bridgehead to enter the U.S. ship MRO market.
Philly Shipyard's diverse business areas appealed to Hanwha. The share of large merchant ships built by Philly Shipyard in the United States reaches 50%. It is responsible for not only the construction of merchant ships, but also the repair and remodeling of US Navy transport ships. It also has experience building large multipurpose training ships and government ships for the U.S. Department of Transportation's Maritime Administration (MARAD). The dock is also the largest in the United States.
Austal also had similar advantages. Austal Shipyard operates shipyards not only in Australia but also in Vietnam, the Philippines, and the United States. It also has experience receiving orders for U.S. Navy ships. Special ships that are mainly built include littoral combat ships (LCS), expeditionary fast transport ships (EPF), and multipurpose landing craft (LCU).
In addition, Austal is also engaged in a ship maintenance business. The US dock owned by Austal can be used as an MRO business site.
The MRO market is huge and has great growth potential. According to market research firm Modo Intelligence, the global naval ship MRO market size is expected to expand from $57.76 billion (approximately KRW 79.71 trillion) this year to $63.62 billion (approximately KRW 87.8 trillion) in 2029. The size of the U.S. ship MRO market that the company is currently targeting amounts to 20 trillion won per year. It is one quarter of the global market.
The industry expects that the domestic shipbuilding industry's MRO business performance will become visible as early as this year. In a conference call announcing earnings for the first quarter of this year, Hanwha Ocean said, “MRO targets will be focused on support ships. “We expect it to be in the first half of this year at the earliest.”
HD Hyundai is also planning a strategy to enter the U.S. ship MRO business. However, it is assessed that the plan was delayed as Hanwha Ocean acquired the Philly Shipyard. Previously, HD Hyundai Heavy Industries signed a business agreement (MOU) with Philly Shipyard, which was recently acquired by Hanwha Group, for the U.S. government's ship and government ship MRO project. Hanwha responded quickly, and HD Hyundai Heavy Industries' plan was abandoned.
Hanwha Group's ultimate goal is to build American combat ships. First, Hanwha Ocean plans to obtain Facility Security Certification (FCL) and pursue major U.S. naval ship projects. Considering that it takes several years to obtain facility security certification, it appears that the preparation process will have to be completed by 2027 at the earliest.
An industry official said, “Acquiring a local company is a key requirement in concluding a direct supply contract with the U.S. government,” and added, “The evaluation items for the U.S. acquisition project proposal include requirements to determine how to foster local companies.”
However, Hanwha's plan to acquire Austal is progressing more slowly than expected. Previously, Austal rejected Hanwha Ocean's acquisition offer on two occasions. Last year, it was cited as a reason for ransom, and in March this year, it was cited as a reason that the possibility of approval was limited considering ownership related to defense contracts.
The industry believes that Austal’s ‘cold attitude’ is a move aimed at raising the ransom. An industry official said, “This is something that often happens during a typical M&A process,” and added, “Hanwha will not give up easily as it can ultimately aim to enter the U.S. ship market through the acquisition of Austal.”
Source: Sisa Journal e (https://www.sisajournal-e.com)
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