https://thewest.com.au/business/mergers-and-acquisitions/forrests...

https://thewest.com.au/business/mer...anwha-offer-for-shipbuilder-austal-c-14561573

Forrests to hold out for increased $1 billion-plus Hanwha offer for shipbuilder Austal

Sean SmithThe West Australian
Mon, 6 May 2024 8:26AM


Austal chief executive in front of an Austal-made US warship in Sydney. Credit: Supplied

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 under $2.50, 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.

Tattarang’s view is supported by analysts including those from MST Access, who suggested on Monday that Austal was worth closer to $4 assuming the company will win between $7 billion and $10 billion of contracts. MST, which is paid by Austal for its research, said that on that basis, Austal shares would be worth $3.66 to $3.88.


Austal shares jumped nearly 6 per cent, or 13¢, to $2.48 when trading resumed on Monday.

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.”

WA’s Henderson shipyard, where Austal is the major builder, is earmarked to build landing craft and frigates for the RAN.
“Approvals and funding commitments are needed for most of these programs,” Argonaut said.
“However, the (Federal) Government has made it clear that it desires a sovereign shipbuilding capability and continuous shipbuilding programs.
“The Henderson precinct and Austal have already been earmarked for this role.
“As Austal appears to be an integral part of the Government’s defence strategy we believe there is now growing potential for decades of work in Australia as well as in the US.”