Australia “Not Concerned” by Possible Hanwha Acquisition of Austal

The Australian government is not concerned about a possible acquisition of shipbuilder Austal by South Korea’s Hanwha Group and is unlikely to stand in the way of a deal. These comments were made by Australia’s Deputy Prime Minister and Minister for Defence Richard Marles after meetings with his South Korean counterparts today, May 1, in Melbourne. Austal had previously rejected overtures from Hanwha citing concerns over government approval.

Marles told reporters according to South Korea’s Yonhap News Agency that while they view Austal as a strategic shipbuilder and important contributor in Australia, they could put in place security arrangements for sensitive technologies and intellectual property if a deal proceeds. He said the government did not object to the deal.

"Ultimately, this is a matter for Austal, they are a private company," Marles said according to media reports. "From the government's perspective, we don't have any concern about Hanwha moving in this direction."

During the discussions with South Korea’s Defense Minister Shin Won-sik, they two discussed a broad range of issues and toured a facility working on infantry fighting vehicles. South Korea is anxious to expand its relationships with Australia and develop more business opportunities similar to a 2023 agreement for Hanwha to provide the infantry fighting vehicles and a 2021 deal for self-propelled howitzers.

According to the media reports from the post-meeting briefing, the South Korean officials also expressed interest in participating in the second pillar of the AUKUS program, the 2021 trilateral security partnership between Australia, the United Kingdom, and the United States. The program involves nuclear submarines, while the second phase would focus on hypersonic applications, undersea drones, and the use of artificial intelligence. 

Austal went public at the beginning of April saying it was not granting Hanwha’s request for a limited due diligence to formalize its offer to acquire the shipbuilder. Australia’s Financial Review (AFR) reports Hanwha has made three offers over a six-month period to Austal but that it may be competing with U.S.-based private equity firm Cerberus Capital Management which is also interested in acquiring Austal.

AFR is quoting a spokesperson from Austal saying the company’s position has not changed in the past month. They believe Hanwha has continued to pressure Austal’s board to begin a due diligence. The newspaper says Hanwha supplied assurances from top defense officials and the Western Australian government also showing no objections to the proposed acquisition. Hanwha previously called the statements from Austal's board over regulatory approvals "baseless."

There has been less attention on a possible U.S. response even though Austal is also a major U.S. defense contractor. U.S. Secretary of the Navy Carlos Del Toro recently visited Hanwha and the South Korean shipbuilders. He suggested several possibilities of how Korean shipbuilders could be used to help expand the U.S.’s lagging shipbuilding capabilities and capacity.

The comments showing that the government of Australia is unlikely to object are also important because the Australian government has reported it plans to review and overhaul foreign investment rules. Transactions involving national security, a major contributor such as Austal, are likely to get increased scrutiny under the potential new rules to be proposed by the Albanese government.