Australian Treasurer Jim Chalmers announced on Dec. 12 (local time) that he “accepted the clear recommendation from the Foreign Investment Review Board (FIRB) not to oppose Hanwha’s proposal to increase its stake in Austal from 9.9% to 19.9% under strict conditions.” If the additional share acquisition proceeds, Hanwha Group will surpass Austal’s existing largest shareholder Tataran Ventures (19.28% as of the end of the first half) to become the largest shareholder. However, Treasurer Chalmers added, “Under this proposal, Hanwha cannot increase its Austal stake beyond 19.9%.”

Hanwha Group has been pursuing the Austal acquisition since last year. Although the acquisition fell through in April last year when Austal’s management rejected the acquisition proposal, in March this year, Hanwha Systems and Hanwha Aerospace suddenly acquired a 9.9% stake in Austal through over-the-counter transactions.

Hanwha Group subsequently applied for approval from the Australian and U.S. governments to increase its Austal stake to 19.9%, and received permission from the U.S. Committee on Foreign Investment in the United States (CFIUS) in June to expand its stake up to 100%. Austal has been designated as a strategic shipbuilding company by the Australian government, requiring approval from both Australian and U.S. governments for overseas corporate sales.

Austal, headquartered in Australia, operates shipyards in Mobile, Alabama in the southern U.S. and San Diego, California in the west, and is one of the four key suppliers that build and deliver U.S. warships. It holds the top market share of 40-60% in the U.S. small surface vessel and military support vessel markets.

With Hanwha Group positioned to become Austal’s largest shareholder, it can effectively share the status of a U.S. defense company. The U.S. regulates through the Jones Act that only vessels built within the U.S. can navigate American coastal waters, and warship construction is also strictly limited to domestic facilities.

However, although Austal is an Australian company, it produces U.S. Navy coastal combat ships and other warships as well as nuclear-powered submarine modules through its subsidiary Austal USA located in Mobile, Alabama. This is evaluated as securing an optimal partner for Hanwha, which has been targeting the U.S. Navy warship order market. Additionally, it has established a foundation for natural integration into the core supply chain of the AUKUS (Australia-United Kingdom-United States) project, a security alliance between the U.S., UK, and Australia.

Furthermore, technology cooperation is also promising. The medium-to-large steel vessel technologies for submarines and destroyers possessed by Hanwha Ocean and Austal’s aluminum special vessel and small-to-medium high-speed patrol boat technologies are expected to enhance the technological capabilities of both companies. A Hanwha official evaluated, “Through Philly Shipyard and this Austal stake acquisition, we have been able to complete a portfolio that can provide one-stop service for all ship types and services needed by the U.S. Navy.”

Source: BusinessKorea