A private equity deal involving an acquisition of defence contractor Austal, backed by billionaire Andrew Forrest, looks unlikely following the company’s profit downgrade last month.
US-based private equity firms Cerberus and Arlington Capital Partners have been interested in Austal, but DataRoom understands that they have been spooked by the group’s downgrade.
This column has learned that John Hartman, chief executive of Tattarang and Minderoo Foundation, the private business interests of Fortescue Metals executive chair Andrew Forrest, is keen to see a buyout of Austal.
However, Tattarang declined to comment on its position surrounding Austal.
Tattarang holds about 14 per cent of Austal and needs a win after challenges with investments elsewhere, including the collapse of skincare products company BWX, where the value of its 16.9 per cent holding it bought for just over $30m was destroyed.
Global ship builder Austal is listed locally with a market value of about $800m. It’s a prime contractor that specialises in the design, construction and support of defence and commercial vessels.
Its product range includes naval vessels, high-speed ferries and supply vessels for offshore wind farms and oil and gas platforms.
Its has shipbuilding facilities in Henderson, Western Australia, and Mobile, Alabama, while commercial vessels are built in Balamban in the Philippines.
The Australian business is considered sub-optimal, and while it is keen to attract more contracts, this isn’t easy.
The US business is far larger and more attractive, but it has strict security restrictions, including a rule that no one from the parent company can attend sites without permission from the Pentagon.
Austal told the market last month that its USA program faced changes in specifications and cost pressures.
Efficiency assumptions for its newly commissioned steel manufacturing line did not meet forecasts and have been revised.
Austal reduced its earnings before interest and tax guidance for the 2023 financial year from $58m to $10m, but said it had $179m of cash.
The group’s share price was trading at about $2 at the start of the year but rallied to more than $2.50 when private equity started looking at the business. Shares are now trading at $2.22.
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