Austal Continues Efforts for Possible Sale of US Shipbuilding Operations
Austal confirmed in a stock exchange filing on Wednesday, October 14, that it has commenced commercial negotiations with Hanwha Defense USA while also extending the due diligence process following the earlier indication of interest in acquiring the US operations of the Australian company. At the same time, it reports there is an ongoing dialogue with a US-based investment firm that also indicated interest in bidding for the shipbuilding operations.
The companies went public in early August, reporting that Hanwha Defense USA had made a non-binding offer of between $1.0 and $1.2 billion for the U.S. operation while calling for a due diligence review. Hanwha says the substantive issues have been completed but that it is also extending the due diligence period to complete “lower materiality data requests” from Hanwha that remain outstanding.
The goal was to permit Hanwha to review the data in order to firm up its indicative, non-binding, conditional offer, which was announced on August 10. Austal expects Hanwha to produce a binding offer and reports that negotiations have begun with Hanwha regarding a potential transaction. Austal reports it is also seeking professional advice on various tax implications for a potential deal.
A month after the initial announcement, U.S.-based Wildcat Infrastructure also came forward with a separate “non-binding indication of interest” for the U.S. operations of Austal. It proposed a higher valuation of $1.25 to 1.35 billion on a cash-free, debt-free basis. However, it is said it was conditional on being able to conduct four weeks of due diligence.
Ausutal says it “remains in ongoing dialogue with Windcat Infrastructure.” It did not indicate if the proposed due diligence would proceed or if it could be setting the stage for a bidding war.
The continuing discussions represent a change in posture for Austal, which a little over a year ago rejected overtures from Hanwha to acquire the whole company. At the time, Austal questioned the ability of Hanwha to gain the necessary approvals in the United States and Australia. Since then, Austal has finalized its strategic shipbuilding partnership and position as a prime contractor for the Australian Defence Force, leading analysts to believe the company has decided to focus on its Australian shipbuilding.
that matters most
Get the latest maritime news delivered to your inbox daily.
While it has achieved status as a major supplier to both the U.S. Navy and the U.S. Coast Guard, the company has had challenges with its U.S. operations and their financial performance. It is best known as the builder of the Littoral Combat Ship (LCS) and more recently moved into steel construction for the United States. It has also expanded into projects including the Offshore Patrol Cutters for the U.S. Coast Guard and building modules for the U.S.’s Virginia and Columbia submarine programs.
While there is no certainty that a deal will be struck to sell the U.S. operations, the announcement confirms progress. Hanwha has been anxious to expand its position in the U.S. market and develop the shipbuilding business for the U.S. Navy, which included the purchase of the Philly Shipyard. Wildcat has indicated that it would continue the Austal operations, including the brand name in the United States, as the investment firm looks to build a presence in the defense industry.
