Shipbuilder Austal has confirmed Hanwha Ocean is looking to come aboard as its new owner but says any potential takeover talks would hinge on further “certainty” from the South Korean suitor.
The Henderson-headquartered company on Monday said the offer of $2.825 a share — a 25 per cent premium to its last closing price of $2.20 — would be subject to due diligence and a host of regulatory approvals, including from defence agencies in both Australia and the US.
The offer values the company at just over $1 billion.
“The Austal board, together with its advisers, has considered the indicative proposal in detail and engaged with Hanwha in relation to whether the transaction described in the indicative proposal would obtain the relevant regulatory approvals in Australia and the USA to enable it to proceed,” the company said.
“At present Austal is not satisfied that these mandatory approvals would be secured, however the company is open to further engagement if Hanwha is able to provide certainty on whether a transaction would be approved.”
Austal — which is backed by a near 20 per cent stake from mining magnate Andrew Forrest’s private family investment business — has shipyards in WA, Vietnam and Alabama in the US, where it derives the bulk of its revenue building ships for the country’s navy.
Its Henderson facility is in line to pick up billions of dollars in defence spending by the Royal Australian Navy.
The company in February said it would need an estimated 1200 workers to support the new building programs — more than tripling the local workforce to nearly 1800.
At the time, chief executive Paddy Gregg said Austal was already working on new patrol boats and landing craft, and the prospect of added contracts for the bigger RAN frigates and autonomous vessels had given the group the certainty it had never had in Australia.
But it could be a drawn-out process for Hanwha to clear the hurdles required to secure a deal for Austal.
It would need the backing of both Austal’s board and shareholders and would then have to win the support of Australia’s Foreign Investment Review Board, the Committee on Foreign Investment in the United States and the US Defense Counterintelligence and Security Agency.
Austal said it assessed a range of factors before granting access to its “otherwise confidential detailed financial records, forecasts and contracts”, including a potential purchaser’s ability to ultimately complete a transaction “which would include necessary government approvals”.
“This latter consideration is particularly relevant in relation to the proposal from Hanwha, given Austal’s position as the designer and builder of defence vessels for the Australian and US navies and ownership clauses associated with defence contracts,” it said.
Austal also noted a deal it announced with the Federal Government in November last year to work toward a shipbuilding agreement that would make it a strategic partner for the construction of navy vessels in WA.
“The Commonwealth Department of Defence noted that ‘a sovereign and enduring naval shipbuilding and sustainment industry at Henderson is central to the Government’s commitment to ensuring continuous naval shipbuilding in Australia and delivering the capabilities needed to keep Australians safe,” it said.
Austal has advised shareholders to take no action.