Hanwha wants to match Forrests’ Tattarang on Austal register, seeks FIRB permission

The billionaire Forrests could be matched to the dollar by shareholder Hanwha on the register of the company described as the “sovereign champion for Australia”.

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

South Korea’s Hanwha Group is on a potential collision course with billionaires Andrew and Nicola Forrest as it seeks the Albanese government’s permission to increase its stake in Australian and US navy shipbuilder Austal.

Hanwha intends to sit right on the 19.9 per cent threshold before Australia’s takeover rules kick-in, putting it on the same footing as the Forrests through their private company Tattarang.

The Austal board was not approached by Hanwha in advance of a sharemarket raid on Monday that netted it 9.9 per cent of the stock.

Seoul-headquartered Hanwha said on Tuesday that it would seek Foreign Investment Review Board approval to lift its stake to 19.9 per cent.

Austal’s previously spurned suitor said it wanted to become a “long-term strategic partner” in developing Australia’s defence industry capability.

Hanwha also wants a seat on the board of Austal, which has been anointed as Australia’s preferred navy shipbuilder on the west coast and is already a supplier to the US Navy.

One week ago, the billionaire Forrests described the Perth-based company as a “sovereign champion for Australia”.

The Forrests already have Brent Cubis as their representative on the board and are expected to appoint a second representative in the wake of the company raising $220m in new equity last week to help pay for its expansion in Alabama, where it constructs warships and components for nuclear-powered submarines.

Tattarang took up its pro-rata share of the raising at a cost of more than $40m.

The shipmaker raised new capital at $3.80 a share. Hanwha picked up a chunk of its holding at that price.

It is understood Hanwha had been planning the share raid for some time and independent of the equity raising.

Hanwha’s recently appointed global chief executive officer and president at Hanwha Defence, Michael Coulter, said the South Korean company saw a long-term opportunity in partnering with Austal.

“As a strategic shareholder there will be a great opportunity for us to add significant value to Austal’s business, including in global defence and shipbuilding, supporting investment in Australia’s local manufacturing industry and capacity,” he said.

“Hanwha’s position as a global leader in smart shipbuilding will provide Austal access to capital, international relationships and operational and technical expertise which can accelerate the development of Austal’s business and in turn, enhance Australia’s sovereign defence capability, at a time when this capability is more important than ever.”

Mr Coulter joined Hanwha from Leonardo DRS in mid-December. Hanwha said at the time it was aiming to “strengthen its strategic position by delivering integrated land, sea, and air solutions in key global markets, particularly the US”.

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

Austal rebuffed Hanwha for months on the basis that it was unlikely to secure the necessary regulatory approvals.

However, Defence Minister Richard Marles said last May that the Albanese government had no concerns with the Hanwha bid. Hanwha was building a factory near Geelong in Mr Marles’ electorate to produce armoured vehicles for the army at the time of his comments.

Mr Coulter said Hanwha would engage with Austal about board representation shortly.

“Ultimately, we believe a Hanwha position on the board will allow for the future value of Austal to be maximised for all stakeholders by fully aligning interests,” he said.

“Hanwha’s global defence strategy prioritises growing local, sovereign presence through investment and partnerships, as exemplified by our investment in land capability in Geelong and elsewhere around the world. We believe strongly that we can replicate that success with Austal, investing in sovereign capabilities both in Australia and with its global operations.”

Any takeover of Austal would require approval from FIRB as well as the Committee on Foreign Investment in the US and the US Defence Counterintelligence and Security Agency.

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

Mr Rothwell, one of the board members who doubted Hanwha’s capacity to gain regulatory approvals, reaped more than $40m from his selldown.

Last week’s public statement by Tattarang, which first invested in Austal two years ago and has profited about $180m so far, was a rare glimpse into its thinking.

“Tattarang is a long-term investor in Austal, and we’re focused on its strong fundamentals and the long-term growth opportunity for the business,” Tattarang chief executive John Hartman said.

“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 (the company’s shipyards south of Perth) and participation in the submarine supply chain in the US.

“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.”