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Australian shipbuilder Austal (ASX: ASB) announced on Tuesday that it had turned down a takeover bid worth AU$1.02 billion ($661.9 million) from South Korea's Hanwha Ocean (042660.KS) due to concerns about regulatory approval in Australia and the United States, given the sensitive nature of its operations.
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The Western Australia-based company disclosed that it had received an offer at AU$2.825 per share, representing a premium of 28.4% over Austal's previous closing price. In response to the news, Austal's shares surged by 10.45% in morning trading, outperforming the performance of the Australian S&P/ASX200 index.
Austal recently inked a preliminary agreement with the Australian government in November, positioning itself as a strategic shipbuilder for the country. Additionally, the company serves as a key contractor involved in the design, construction, and maintenance of ships for the U.S. Navy.
However, Austal expressed doubts about the likelihood of regulatory approval for Hanwha's bid in its current form, citing concerns about its role as a supplier for defense vessels in both Australia and the United States. The approval process would involve scrutiny from Australia's Foreign Investment Review Board (FIRB), the Committee on Foreign Investment in the U.S. (CIFIUS), and the U.S. Defense Counterintelligence and Security Agency.
"Austal believes government approval is particularly critical in relation to the proposal from Hanwha, given Austal's status as the designer and builder of defense vessels for the Australian and U.S. navies, and the ownership clauses associated with defense contracts," the company stated.
While acknowledging its openness to further engagement with Hanwha, Austal emphasized the need for certainty regarding regulatory approval before proceeding with any transaction. Austal's market capitalization prior to the bid stood at nearly A$800 million.
