Navy shipbuilder changes courses on funding with share price at record high

Andrew and Nicola Forrest will tip another $40m into Austal to help fund a big expansion of its shipyards in Alabama.

Andrew Forrest through the family’s private company Tattarang will participate in the Austal raising. Picture: NewsWire / Martin Ollman

Australia’s global shipbuilder Austal has billionaires Andrew and Nicola Forrest on board as it raises $220m in new equity to help pay for a big expansion in Alabama where it constructs steel-hulled warships for the US navy, and components for nuclear-powered submarines.

The Forrest family, through their private company Tattarang, own 19.9 per cent of Austal and committed to taking up their pro-rata share in the raising at a cost of more than $40m.

Tattarang boss John Hartman said the Forrest entity saw significant opportunity for growth as Austal executes on its $14bn-plus pipeline of work and looked to cash in on its status as the Australian government’s preferred navy shipbuilder.

“Austal has proven itself an indispensable part of the shipbuilding supply chain with continued contract awards from the US and Australian governments, including selection as the strategic shipbuilder in Henderson and participation in the submarine supply chain in the US,” he said.

“Austal is a sovereign champion for Australia, providing much needed defence manufacturing capability. Austal has been investing heavily in its workforce and facilities to support the needs of both the Australian and US governments.”

Mr Hartman indicated the Forrests had invested for the long term. Tattarang will be entitled to a second board seat in addition to backing independent director Brent Cubis.

Austal is looking to pocket $200m from a fully underwritten placement and up to another $20m from a share purchase plan after changing course on debt funding plans as the company’s share price soared to record highs.

The placement at $3.80 a share represented a 15.5 per cent discount on Monday’s record closing price of $4.50.

Former Austal chairman John Rothwell is selling more than a third of his 9 per cent stake in the company he founded into the raising.

Mr Rothwell, who stood down as chairman last year and handed the reins to former US navy secretary Richard Spencer, is set to reap more than $40m from his selldown.

The veteran businessman founded Austal in 1987 and was chairman for 37 years and executive chairman until 2008. He has been vindicated in leading board resistance to a $1bn takeover bid for the company by South Korea’s Hanwha.

Austal chief executive Paddy Gregg. Picture: NCA NewsWire / David Swift

Hanwha abandoned its takeover offer pitched at $2.85 last September, accusing Austal of making it impossible to conduct due diligence ahead of a binding offer.

Austal is looking to fund a $US300m ($477.6m) expansion in Alabama where it needs a new shed and other infrastructure to build steel-hulled vessels for the US Navy and Coast Guard while also making command and control systems modules and electronic deck modules for the US nuclear submarine fleet.

It said the project would be funded by a combination of the equity raise and new debt. The work involves a new assembly building, waterfront improvements and a new ship lift system.

Austal has said it can likely absorb increases in steel and aluminium costs as a result of Trump administration tariffs on imports through clauses built into its contracts with the US Navy.

Perth-headquartered Austal has two contracts totalling $US600m ($939m) – one from the US Navy and another from General Dynamics Electric Boat – to invest in additional infrastructure at its Alabama shipyard to help build components nuclear-powered submarines that are a key plank of the AUKUS security pact.

Austal expects annual earnings of at least $80m before interest and tax.