Marles’ green lights Korean bid for WA shipbuilder

Richard Marles has endorsed a potential South Korean takeover of Australia’s biggest home-grown defence company, Austal.

From left, Penny Wong, her Korean counterpart Cho Tae-yul, Defence Minister Richard Marles and his counterpart Shin Won-sik in Melbourne. Picture: Getty Images

Richard Marles has endorsed a ­potential South Korean takeover of Australia’s biggest homegrown defence company, Austal, as he flagged a “much deeper” defence relationship with the key Asian partner.

Speaking alongside his South Korea counterpart on Wednesday, the Defence Minister said the government would not stand in the way of Korean defence giant Hanwha’s $1bn bid for the Perth company – Defence’s monopoly shipbuilder in Western Australia.

“Ultimately this is a matter for Austal. They are a private company,” Mr Marles said. “From the government’s perspective, we don’t have any concern about Hanwha moving in this direction.”

His comments came as Korean Defence Minister Shin Won-sik confirmed his country was looking at participating in AUKUS’s “Pillar II” technology-sharing partnership, which Japan is also considering joining.

Austal’s shares closed more than 3 per cent higher following Mr Marles’ statement, which undermined Austal’s claim that Hanwha’s bid was unlikely to receive Foreign Investment Review Board approval. Newly announced rules to favour bids by friendly countries for national security assets are likely to bolster Hanwha’s case.

But Austal, which rejected Hanwha’s offer last month, said it remained sceptical of the company’s ability to satisfy regulators in Australia and the US, and would continue to deny the South ­Korean conglomerate access to sensitive data to undertake due diligence.

Hanwha has said it is a “credible buyer” and its $2.825-a-share bid is “highly competitive”. It is now seeking the support of major Austal shareholders – including Andrew and Nicole Forrest’s Tattarang – to apply pressure on the company’s board.

Austal was named last year as the government’s strategic shipbuilder at WA’s Henderson shipyards, where eight new general purpose frigates will be built for the navy. Hawha is one of four foreign firms vying to build the frigates.

The WA shipbuilder’s American subsidiary also has extensive US Navy contracts, ensuring a say for the Pentagon over the sale of the company.

Mr Marles – who has a Hanwha plant in his electorate – said any deal involving Austal would require strict security arrangements to protect sensitive technology and intellectual property.

“That would have to be managed no matter what the future of Austal, and were there anything that were to transpire in relation to Hanwha, that would need to be managed in that context as well,” he said.

After a “2+2” meeting in Melbourne with Mr Shin, Foreign Minister Penny Wong and her counterpart Cho Tae-yul, Mr Marles said Australia and Korea shared a “remarkably similar” strategic outlook, and would ­expand engagement in a range of military exercises this year.

He said Hanwha’s new Geelong factory to build infantry fighting vehicles and howitzers for the army was at the heart of the ­nation’s burgeoning defence ­industry partnership. “Across the board, this is a relationship which is going to a new place, a place which is much deeper and much closer,” Mr Marles said.

Mr Shin with Mr Marles ahead of their meeting on Wednesday. Picture: Getty Images

Mr Cho said the countries were “pivotal partners” committed to deepening strategic co-operation.

A joint statement issued after the talks said the ministers highlighted the value of “co-producing defence equipment and co-pioneering new markets on the basis of ROK-Australia defence industry collaboration”.

Hanwha owns the world’s second-largest shipyard and has been building vessels for more than 50 years, including warships and submarines for its own country as well as for the UK and Norway.

Allowing a foreign takeover of Austal could complicate Australia’s negotiations for an AUKUS exemption from the US’s strict ­export control laws.

But US Secretary of Navy Carlos Del Toro has lauded South Korea’s shipbuilding prowess, inviting Hanwha and other Korean defence companies to invest in American shipyards.

In an April 9 speech, he said South Korean and Japanese shipbuilders could build warships “for a fraction of the cost that we do”.

“When my team and I went to South Korea, we were floored at the level of digitisation and real-time monitoring of shipbuilding progress, with readily available ­information down to individual pieces of stock materials,” Mr Del Toro said.