Uncle Sam eyes Aussie ship builder

Andrew Forrest and Tattarang chief executive John Hartman at Austal's Alabama shipyards.

Observers watching developments with listed ship builder Austal could be keeping their eye on the wrong horse when it comes to a possible buyout.

While Hanwha has been in pursuit for some time, and its latest quest to gain 19.9 per cent shows it still has an interest, the ultimate outcome for the ship builder could be US ownership, several market observers say.

This could either be through a listing in the US or a group such as General Dynamics launching a buyout proposal.

General Dynamics, which operates as a prime contractor to the US military and the Australian Defence Force, is one of the largest defence contractors in the world. While Austal is based in Perth, about 90 per cent of its revenue comes from the US, where it has defence contracts.

Tattarang chief executive John Hartman is likely against a buyout by a Korean group, as is Austral founder and director John Rothwell, and there’s no certainty the US government would continue to offer Austal work should Hanwha become the owner.

A US group would be a more favourable option to some directors and perhaps both the Australian government, which has so far said it would not stand in the way of the Koreans buying the business, and the US government, with the group carrying out defence work as part of the AUKUS agreement.

Another possibility is Tattarang, the private company of Andrew Forrest, could privatise the business with Hanwha, but there’s a view Dr Forrest would sell to a US bidder if it offered enough money.

It’s also unclear whether Austal would gain regulatory clearance and still win defence work if Tattarang, which owns 19.9 per cent and has sought board representation, and Hanwha were joint owners.

For shareholders, the company needs to deliver on margins and earnings. The federal government recently awarded Austal a pipeline of work as it bolsters its defence capabilities to respond to an assertive China.

Shares in Austal last traded at $4.26 after Hanwha last year offered $2.825 per share, equating to a market value of just over $1bn.