South Korean suitor Hanwha will need to sweeten its potential $1 billion offer for Austal to entice Andrew and Nicola Forrest out of their major shareholding in the strategically important WA shipbuilder.
It is understood that the Forrests’ family investment flagship Tattarang — Austal’s biggest shareholder with a 19.9 per cent stake — believes Hanwha’s $2.825-a-share proposal significantly undervalues the Australian Securities Exchange-listed company.
Sources close to Tattarang say that while Austal shares are trading at near $2.30, Hanwha’s cash offer does not reflect either Austal’s current value or its potential, pointing to the likelihood of the company winning a major share of billions of dollars in contracts to build the Royal Australian Navy’s new generation of warships.
Hanwha’s conditional and indicative offer was disclosed last month following Austal’s rejection of its overtures.
The South Korean company has since launched into a furious round of lobbying in Canberra to support the potential takeover.
However, Austal has refused to grant even limited due diligence to enable Hanwha to finalise an offer, arguing its feedback is that the group is unlikely to win the Australian and US defence approvals needed to buy the WA company.
In an unusual move, which some interpreted as pre-empting a decision by the Foreign Investment Review Board, Defence Minister Richard Marles said last week he had no issue with a Hanwha takeover as long as protocols were put in place to protect sensitive technologies.
While it has yet to seek approval from FIRB, Hanwha says it is confident the approval will be forthcoming.
However, US defence approvals are seen as the bigger obstacle.
Given Austal also builds ships for the US Navy out of its Alabama shipyard, a bid would also need to be endorsed by the Committee on Foreign Investment in the US and the US Defence Counterintelligence Security Agency.
The US is notoriously wary about other countries, even allies, accessing defence technologies.
Perth broker Argonaut last week lifted its valuation of Austal to $2.90 a share from $2.60, “on the basis that Austal is increasingly likely to face decades of work in Australia”.
It said Australia’s revised national defence strategy “emphasises the desire for a sovereign shipbuilding capability and continuous shipbuilding programs”.
“We expect Austal to play an important role.”
More to come