Austal chair refuses Hanwha’s request for board seat
Chairman Richard Spencer has ruled out caving in to Hanwha’s demands for a seat on the Austal board and described his number one shareholder Andrew Forrest ‘as an Australian patriot’.
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MOBILE, ALABAMA: Austal chairman Richard Spencer has blasted South Korea’s Hanwha Group over its renewed attempt to gain a strategic foothold in the navy shipbuilder, and ruled out caving in to its demands for a seat on the board.
Mr Spencer, the former US Navy secretary, said the Austal board had not revised its position since last year, when Hanwha made a $1bn takeover approach and was refused access to its books.
He remains of the view that Hanwha will not get the necessary regulatory approvals from Australian and US authorities to wrest control of Perth-headquartered Austal if it tried to buy the company again.
Mr Spencer warned Hanwha it was “wildly mistaken” if it thought a 30 per cent premium on the current share price would be enough to succeed. Hanwha wants up to 19.9 per cent of Austal, but only owns 9.9 per cent after a sharemarket raid on Monday.
“We’re more than happy to find the best shareholder value, and the only way that can be discerned is for a suitor to go through proper diligence. We won’t open the diligence doors until we’re sure the transaction can be consummated,” Mr Spencer said in Alabama on Wednesday.
“In our eyes, it’d be very difficult for them to pass not only FIRB (Foreign Investment Review Board), but CFIUS (Committee on Foreign Investment in the US) here in the US.
“Not only are we making ships for the US Navy, but we’re making a submarine module for Virginia for the Navy, which is a highly classified piece of gear,” he said, referring to the Virginia class nuclear submarine.
“I would also think it surprising if, in fact, the Commonwealth of Australia would have a national security asset being in someone else’s hands.”
Hanwha’s recently appointed global chief executive officer and president at Hanwha Defence, Michael Coulter, said the giant Korean conglomerate wanted to form a strategic partnership with Austal. He refused to rule out a renewed takeover bid.
Mr Coulter and Mr Spencer and Austal chief executive Paddy Gregg are due to meet in Sydney next week.
The meeting was set up after Mr Spencer received what he described as a “very flowery” email from Mr Coulter, who joined Hanwha in mid-December.
Austal appears confident it will have the backing of billionaires Andrew and Nicola Forrest, who own a 19.9 per cent stake, in any showdown with Hanwha.
“Andrew Forrest is an Australian patriot,” Mr Spencer said.
Mr Gregg said Austal, which has shipyards at Henderson south of Perth as well as in Mobile, Alabama, was very close to signing a strategic shipbuilding agreement with the Australian government.
The deal will open the door for the company to secure about $20bn of work building heavy landing craft, frigates and other warships at Henderson.
That work would be on top of what is already a $14bn order book dominated by contracts with the US Navy at Mobile.
Japan’s Mitsubishi Heavy Industries, which is one of two contenders still in the $10bn race to design and develop 11 frigates for Australia, has said it cannot work with Hanwha.
The Australian government’s plan is for the building of the frigates to start overseas and then be transferred to Henderson.
Hawha has applied to FIRB for permission to lift its stake to 19.9 per cent, the maximum it can own without launching a takeover. It also wants a board seat.
Mr Spencer said a 9.9 per cent shareholder was not entitled to board representation.
He was surprised Hanwha had come back for a second crack at Austal after abandoning last year’s $2.85 a share bid and complaining the board had made it impossible to carry out due diligence. Hanwha refused to agree to paying a $5m break fee during last year’s standoff.
“Since their last approach, we’ve undergoing a whole transformation process at Austal right now, specifically in North America, where we’re increasing productivity in the neighbourhood of 20 per cent and streamlining the whole production capabilities of the company for a long-range value plan,” Mr Spencer said.
“They are unaware of it because we have not talked about it. But if they’re acquiring shares in the open market right now and think that a 30 per cent premium to that’s going to get this company, they’re wildly mistaken.”
Hanwha’s return at Austal came just a week after the shipbuilder raised $200 million in an institutional placement at $3.80 a share.
Mr Coulter said a Hanwha a factory near Geelong was producing armoured vehicles for the army and employed about 400 people, in a sign of what the company brings to Australia’s defence capability.
Hanwha was also given a green light to acquire Philly Shipyard in the US at the end of 2024.
Mr Coulter said Hanwha thought very highly of Austal and declined to respond to Mr Spencer and Mr Gregg’s statements.
“I would say Hanwha has taken a fresh approach. We believe we’ve listened to the company. We’ve listened to the Commonwealth (Australia),” he said.
“As a defence player in the Commonwealth, we have very regular conversations with both defence and government leaders based on our factory down in Melbourne.”
Austal shares were down 1.9 per cent to $4.04 on Wednesday.
The reporter travelled as a guest of Austal.
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