Hanwha's acquisition of Australian shipbuilder stalls over regulatory concerns

Hanwha Corporation's proposal to purchase shipbuilder Austal remains at a standstill as the Australian company raises concerns over the deal.

Hanwha Ocean's warship prototype is on display at the MADEX 2023, which was held at Bexco in Busan. [JOONGANG PHOTO]

Hanwha Corporation's proposal to purchase shipbuilder Austal remains at a standstill as the Australian company raises concerns over the deal.

The major defense and aerospace conglomerate proposed to buy Austal for at least 895 million Australian dollars ($582.5 million) six months ago.

In an indicative takeover offer, Hanwha suggested a price of $2.825 a piece, in Australian dollar terms, but the specific amount of equity Hanwha can receive is dependent on regulatory permission.

The finalized value of the deal will boil down to the reference period of Austal's stock price, with Hanwha estimating the total deal size to be over 895 million Australian dollars.

Hanwha Ocean, the group's shipbuilding arm, said in an electronic disclosure that Austal had rejected a planned due diligence process for the potential buyout deal.

“Hanwha had agreed with Austal to conduct on-site due diligence, but was notified of the abrupt rejection ahead of the planned date,” the company stated on Monday.

“The company is making efforts to continue negotiations with the management and board of Austal in regard to the deal, but no further discussion has been made yet,” it said.

Hanwha said it was confident it could receive state approval in Australia, citing its track record for regulatory approval in the country.

It also mentioned the amicable relationship between Korea and Australia.

“There is no foundation in the claim that the Foreign Investment Review Board [FIRB] will reject Hanwha’s acquisition of the company,” David Kim, executive vice president at Hanwha, said in a statement.

“Hanwha has already obtained FIRB approval for prior investments in Australia and has a proven track record of investment in Australia’s defense industrial base,” said Kim.

Hanwha has a history in the Australian market, with Hanwha Aerospace, supplying K-9 howitzers and Redback infantry fighting vehicles to the Australian government.

Its Australian subsidiary Hanwha Defense Australia is also building a manufacturing facility in the region to manufacture arms.

Austal expressed concerns over regulatory approval of the deal because of its status as a builder of defense vessels.

“At present, Austal is not satisfied that these mandatory approvals would be secured,” said Austal.

“The company is open to further engagement if Hanwha is able to provide certainty on whether a transaction would be approved,” it said.

Financial firm UBS is working as an adviser on Hanwha’s proposed deal.

BY PARK EUN-JEE [park.eunjee@joongang.co.kr]