Jim Chalmers set to decide on sale of Austal to South Koreans
Treasurer Jim Chalmers faces mounting pressure from Japan as he prepares to decide whether South Korean weapons giant Hanwha can increase its stake in naval shipbuilder Austal.
Treasurer Jim Chalmers is poised to decide within weeks whether to allow a South Korean takeover of Western Australia-based shipbuilder Austal, which is slated to build the navy’s next-generation Mogami frigates.
The decision will be closely watched by Tokyo, which has written to Defence expressing concerns over the bid by Seoul-based weapons company Hanwha – a rival to Japan’s Mitsubishi Heavy Industries, the designer of the Mogami.
Hanwha is seeking to lift its 9 per cent stake in Austal Ltd to 19.9 per cent, which would make it the largest shareholder in the company.
Dr Chalmers conceded he had blown his original September deadline for a ruling on the proposed takeover, but his decision was “imminent”.
“I hope to make that decision in the next week or so, but certainly before Christmas,” he said on Monday.
“This is a very complex case. It has warranted us taking a little bit longer than usual to come to, or to try and come to, (a decision) and conclude these discussions and these decisions.”
All proposed foreign investments above 10 per cent in Australian companies with national security interests are subject to review by the Foreign Investment Review Board, with the Treasurer making a final ruling.
Austal is the government’s nominated strategic shipbuilder under a landmark agreement with the commonwealth.
Dr Chalmers said the government had sped up the FIRB process, approving 99 per cent of applications.
But he said the Austal decision warranted “a bit more consideration” because he wanted to consult with stakeholders and “satisfy myself that all of the work has been done”.
“I like to make sure that when I make these decisions, I’m doing it in a consultative way, in a collaborative way, and so that’s why it’s taken longer than September to arrive at that decision,” the Treasurer said.
Japan’s ambassador to Australia, Kazuhiro Suzuki, signalled last month that Japan was uneasy over the proposed takeover.
“If that decision is made, probably there will be some reaction from the Japanese government but at this moment I’m not in a position to answer that kind of questions,” he said.
Tokyo’s Ministry of Defence reportedly wrote to Australia’s Defence Department at least twice detailing its concerns.
The FIRB process was also complicated by Austal’s position as a contractor to the US Navy, producing warships and nuclear submarine components, and Hanwha’s role as a major investor in the US’s shipbuilding industry.
Hanwha announced in October that it would pour $US150bn ($225.7bn) into Donald Trump’s “Make American Shipbuilding Great Again” initiative. The US President announced a day later that he had approved US support for South Korea to build nuclear submarines at Hanwha’s Philadelphia shipyard.
Austal’s biggest shareholder is Andrew and Nicola Forrest’s Tattarang investment group, with 19.28 per cent.
Austal’s sovereign shipbuilding agreement with the federal government in August included a “poison pill” that would allow the commonwealth to acquire Austal’s Australian operations, including all infrastructure and its workforce, at market price if any party increased its share in the ASX-listed entity to more than 20 per cent.
The first three Mogami frigates will be built in Japan before construction of a further eight vessels is shifted to Perth’s Henderson shipyards.
Austal is set to be appointed as the Mogami shipbuilder in Australia after it completes two classes of landing craft for the army.
In one of its latest decisions, the FIRB recommended against the sale of ASX-listed TPC Consolidated, which owns electricity and gas retailer CovaU, to a Chinese government-backed renewable developer for $100m.
The FIRB also recommended in recent weeks against a plan by Chinese social media giant TikTok to build data centres in Australia.
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