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Armaments contracts lure – Hanwha reaches for Austal

The South Korean shipyard group Hanwha Ocean (formerly DSME) apparently wants to take over the Australian shipbuilder Austal, which is known for its fast ferries.

Austal has confirmed that Hanwha has submitted a takeover bid. The South Koreans are offering A$2.825 (US$1.83) per share. The last price was A$2.20 per share. This would correspond to a total offer of US$662 million. [ds_preview]

Austal’s management initially rejected the offer, citing regulatory concerns in particular. Therefore, it is unlikely that the regulatory authorities in Australia and the USA would approve the transaction. In addition to catamaran ferries, Austal also builds naval vessels for the domestic and American markets. Among other things, the Foreign Investment Review Board (FIRB) would have to approve the deal.

Austal reacts skeptically to Hanwha offer

“However, we are open to further discussions if Hanwha is able to obtain certainty as to whether a transaction would be approved,” Austal said. Prior to Hanwha, US investment funds had also been keeping an eye on the shipbuilder. The military division is apparently more attractive than the civil division.

Among other things, the shipyard is involved in the construction of eight submarines for the Australian Navy. As a subcontractor, the Australians are also involved in submarine orders for the US Navy via their US branch in Mobile and build Littoral Combat Ships (LCS).

The company operates five shipyards in four countries, including Alabama in the USA, near Fremantle in Western Australia, the Philippines and Vietnam.

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Caption: Austal builds Evolved Cape-class patrol vessels for the Royal Australian Navy (© Austal)