Hanwha is pushing for the acquisition of the Australian defense and shipbuilding corporation Austal, and the review by the Foreign Investment Review Board (FIRB) is expected to expedite. The Australian government is re-examining foreign corporate investment reviews that were paused during the federal elections that concluded last month.
According to the industry on the 9th, the FIRB has been reviewing Hanwha's proposal to acquire 19.9% equity of Austal since March. Under Australian corporate law, foreign investors can acquire less than 10% equity of listed corporations without FIRB approval.
Hanwha acquired 9.91% equity of Austal in the over-the-counter market through its Australian subsidiary HAA No.1 PTY LTD and holds 9.9% equity through a Total Return Swap (TRS) contract via a local securities firm.
To create a structure where it directly holds the equity of the indirect investment through the TRS contract, FIRB review is ongoing. The legal review period for FIRB is a maximum of 30 days and can be extended for up to 6 months. Approval results are usually known within 30 to 90 days. Since Austal is a defense corporation, the review appears to take longer. Conditional approvals or rejections are also possible.
In this Australian federal election, the ruling Labor Party secured 93 out of 150 seats. There are observations that the maintenance of power will have a positive effect on foreign investment reviews. The Labor Party has promoted transparency in FIRB's procedures and digital simplifications.
Even if Hanwha receives approval for its equity investment from the FIRB, it does not mean it will acquire Austal. While it may be the largest shareholder, gaining a seat on the board is a separate issue. Hanwha attempted to acquire Austal in 2021, but it was thwarted by opposition from the board at the time. Hanwha is hoping to expand cooperation opportunities after becoming the largest shareholder of Austal and securing a seat on the board.
Austal is an Australian corporation, but since it builds U.S. naval vessels, it must also undergo review by the Committee on Foreign Investment in the United States (CFIUS) when there is a change of the largest shareholder. Currently, the CFIUS review is also underway simultaneously.
The stock price of Austal has risen more than 30% from the price at which Hanwha conducted its public offering. At the time of the public offering in March, the acquisition price per share was 4.45 Australian dollars, and as of the 6th (local time), the stock price recorded 5.77 Australian dollars. It appears that the record high order backlog due to the next-generation submarine module contract and Hanwha's acquisition efforts have influenced the stock price increase.
Austal is one of the largest shipbuilding companies in Australia, constructing warships, high-speed vessels, and commercial ships. It participates in the construction of coastal combat ships and nuclear submarines for the U.S. Navy at its shipyard in Alabama. Hanwha is focusing on the acquisition of Austal to expand its presence in the U.S. shipbuilding market and acquired the Philly Shipyard in Philadelphia, U.S., last June.