Hanwha back for Austal, but this time it just wants a major stake

Hanwha is back for ship builder Austal as it looks to amass a stake. Picture: John Appleyard

Only months after walking away from takeover target Austal, Korea’s Hanwha was in the market on Monday night amassing a stake in the Andrew Forrest-backed naval ship builder.

The understanding is the group has secured 9.9 per cent of shares in Austal which equates to about 41.2 million shares, at $4.45 each, through advisory firm Jarden.

If it gets regulatory approval, it wants to take its holding to 19.9 per cent, but has stopped short of saying it wants to embark on a buyout.

The price offered is 16.2 per cent higher than Austal’s last closing price of $3.83.

The term sheet said the investor did not have any existing holding in Austal, but had an existing economic interest by way of a cash-settled total return swap, which references a notional number of Austal ordinary shares equal to 9.9 per cent, and a cash-settled equity collar transaction in relation to Austal ordinary shares.

Hanwha has no intention of submitting a control proposal, or making a takeover bid for the company, the term sheet said, with any acquisition of shares above 10 per cent requiring approval from the Foreign Investment Review Board.

But, if it secured the stake, it intended to apply for FIRB approval to increase its shareholding to 19.9 per cent.

DataRoom reported in September after a prolonged campaign to convince shareholders and the Australian government it was the right owner of Austal, South Korean ship builder Hanwha walked away from the $1bn Andrew Forrest-backed target and moved on.

Hanwha submitted its first non-binding offer in September 2023 for Austal and had put forward three offers in total including a $1bn bid, revealed in April last year by DataRoom, which was advised by UBS.

Hanwha said in its letter it had requested due diligence, agreed to a 12-month standstill and conducted preliminary US and Australian regulatory approval reviews.

Working with Austal, which counts billionaire Andrew Forrest as a 19 per cent shareholder, has been investment banks JPMorgan and Poynton Stavrianou.

Dr Forrest has opted to seek board representation for Austal, which came after its chairman and founder John Rothwell moved into the position of director and Richard Spencer became chairman.

This month, The Australian reported the company had raised $220m at $3.80 per share to fund expansion plans in Alabama where it make steel-hulled warships for the US navy and components for nuclear-powered submarines.

At that time, Mr Rothwell sold into the raising more than a third of his 9 per cent stake in the company.

The veteran businessman, who founded Austal in 1987, had been leading board resistance to the Korean buyout.

Austal is a major builder of naval ships for the defence forces in the United States and Australia, with the Commonwealth government recently awarding the business a large pipeline of work as it bolsters its defence capabilities to respond to a more assertive China.

Austal rejected advances from Hanwha, partly on the grounds a deal would not gain approval from the Foreign Investment Review Board, but Defence Minister Richard Marles later said publicly the government would not stand in the way of a bid.

Hanwha is the seventh largest family-run South Korean conglomerate, with Kim Dong-kwan the eldest son and heir apparent to chairman Kim Seung-youn.

It has already won billions of dollars of defence work from the Australian government.