Defence Minister unfazed by Austal share raid as South Korea’s Hanwha seeks foreign investment blessing

Australia’s Defence Minister Richard Marles is “definitely not worried” about South Korea’s Hanwha potentially owning an influential slice of WA-based strategic defence shipbuilder Austal. Mr Marles told media in Perth on Tuesday that the conglomerate’s recent push to secure up to 19.9 per cent of Austal – a holding just below the takeover threshold – was “ultimately a matter” for the two companies. “We are comfortable with where Austal’s at,” Mr Marles said. “We’ve determined Austal as the strategic shipbuilder here in a pilot program in Western Australia, and we are comfortable with the ownership of Austal in relation to that. “Ultimately, the question that you’ve asked of which I’m aware is really a matter between Hanwha and Austal.” It comes as Hanwha claims to have found sellers for a 9.9 per cent stake in the Henderson-based shipbuilder at a hefty premium of $4.45 a share, and seeks approval from the Foreign Investment Review Board to build up its stake even further to 19.9 per cent. Treasury is yet to confirm whether it has received an application from Hanwha. But Mr Marles indicated there was no concern about South Korean investment in the navy contractor. “Definitely not worried about South Korean investment. And nor do I think it has any implication in relation to Sea 3000,” the Minister said. German and Japanese companies are reportedly leading contenders to deliver up to 11 frigates for the Royal Australian Navy under the $11 billion program. Hanwha said on Tuesday that it wanted to “partner” with Austal, and said it believed “in the long-term opportunity for us to add significant value.” “As strategic shareholder, there will be great opportunity for us to add significant value in Austal’s business, including in global defence and shipbuilding, supporting investment in Australia’s local manufacturing industry and capacity,” global chief executive Michael Coulter said. Shares in the company were driven up more than 8 per cent on the news to $4.14. The company also intends to seek board representation with Austal, which last year gave short shrift to its takeover approaches. “Hanwha’s position as a global leader in smart shipbuilding will provide Austal capital, institutional relationships and operational and technical expertise which can accelerate the development of Austal’s business and, in turn, enhance Australia’s sovereign defence capability, at a time when this capability is more important than ever,” Mr Coulter said. In a term sheet sighted by The West Australian, Hanwha said it had “no intention of submitting a change of control proposal or making a takeover bid for the company, at this time”. Austal’s biggest shareholder, Andrew and Nicola Forrest-owned Tattarang, declined to comment on Hanwha developments. Hanwha’s return to Austal came just a week after the shipmaker raised $200 million from an institutional placement at $3.80 a share. It is believed that Hanwha acquired some of its holding from investors in the raising who saw an opportunity for a quick profit. Austal repeatedly argued last year in rejecting Hanwha’s overtures that the South Korean company had no realistic chance of winning the US defence approvals needed to secure the former’s flagship shipyard in Mobile, Alabama, which has turned out ships for the US Navy for the past 15 years. Founder John Rothwell said also he would not accept an offer from Hanwha for his then 9 per cent stake. Hanwha’s takeover proposal of $2.85 a share has since been overtaken by the rapid run in Austal’s share price, which hit a record $4.50 immediately before the placement. Mr Rothwell sold down $50m of his stock as part of last week’s raising but remains a key shareholder at Austal, behind major investors Andrew and Nicola Forrest with a combined 19.6 per cent. Austal had flagged using debt to largely fund its $US300 million ($476m) next stage expansion in the US, where it plans to upgrade its flagship Mobile shipyard with a huge extra assembly shed and a large shiplift by 2027 to deliver steel-hulled vessels, while building capacity to make components for US nuclear submarines. Last month, chief executive Paddy Gregg described the outlook in both the US and Australia as “fantastic”, pointing to a $14 billion order book and $US600m of industry investment in a new Austal facility in the US that will build modules for US nuclear submarines and ultimately employ more than 1000 .