South Korean Hanwha has secured approval to increase its direct equity shareholding in the Australia’s ASX-listed shipbuilder and defence prime contractor Austal from 9.9% to 19.9%.
The Australia’s federal treasurer Jim Chalmers, alongside the foreign Investment review board, has approved an application from HAA Pty Ltd, an entity controlled by South Korean shipbuilder, Hanwha Corporation (Hanwha), to increase its direct equity shareholding in Austal, according to an announcement by Austal on December 12.
Paddy Gregg, chief executive officer of Austal, said: “Treasurer Chalmers has made his decision and we respect that decision.”
“With the clarity provided by this decision, the board and management are firmly focused on delivering value for all Austal shareholders as Australia’s sovereign shipbuilder under the Strategic Shipbuilding Agreement (SSA), a major contributor to the US defence industrial base, and with significant growth opportunities at our US and Australasia operations.”
The treasurer’s approval is subject to strict conditions, Austal notes citing the treasurer’s release, regarding Hanwha’s access to and storage of sensitive information and who Hanwha may nominate to the board of Austal, if Austal was to accept any such nomination.
Austal said it has not yet been formally advised of these conditions or the approval itself.
According to Austal, Hanwha has previously publicly indicated that if it was approved to move to a 19.9% shareholding it would seek to partner with Austal on various shipbuilding opportunities and seek a board position.
In the company’s ASX announcement it is mentioned that “the Austal board will closely review the opportunities and risks associated with those partnership and board position requests, should they be made officially, before it determines whether this would deliver demonstrable benefits for all Austal shareholders.
“Relevant factors which would need to be assessed would include feedback from design partners, the efficient running of the board and its meetings given discussions of sensitive national security topics, potential additional governance and security measures required of the company, the claimed value from the commercial cooperation and of any Hanwha board nominee to Austal’s ship building expertise, and the governance impact of an additional non-independent director.”
Any future change of control transaction to move beyond 19.9% would also require separate approvals from FIRB/Australian treasurer and the US defense counterintelligence and security agency (USDCSA).
