In brief
Austal Limited says it has received an unsolicited, conditional and non-binding proposal from Hanwha Ocean to acquire the company through a scheme of arrangement. The proposal would pay Austal shareholders $2.825 in cash for each share and depends on due diligence, regulatory clearances in Australia and the United States, board decisions and shareholder approval. Austal says its board and advisers have examined the offer and discussed whether the required government approvals could be obtained. The company is currently not satisfied that those approvals would be secured, citing its role in building defence vessels and contract ownership provisions, but says it remains open to talks if Hanwha can provide greater certainty. Austal noted its planned negotiations with the Australian Department of Defence over a strategic shipbuilding agreement. Shareholders need take no action, the company says.
Key takeaways
- Hanwha’s non-binding offer proposes $2.825 cash for each Austal share through a scheme of arrangement.
- The proposal is conditional on due diligence, regulatory approvals, and board and shareholder decisions.
- Austal says it is not currently satisfied the mandatory Australian and US approvals would be secured.
- The company remains open to engagement if Hanwha can provide certainty about approval prospects.
April 2, 2024 -- Austal Limited (ASX:ASB) (Austal) refers to media on 1 April 2024 and confirms it has received an unsolicited, conditional and non-binding indicative proposal from Hanwha Ocean Co., Ltd. (Hanwha) to acquire Austal by way of a scheme of arrangement (Indicative Proposal). Under the Indicative Proposal, Austal shareholders would receive $2.825 cash per Austal share.
Hanwha’s Indicative Proposal is subject to numerous conditions, including due diligence, various regulatory approvals including Australia’s Foreign Investment Review Board (FIRB), the Committee on Foreign Investment in the United States (CFIUS) and the US Defense Counterintelligence and Security Agency, final approval of the Hanwha Board, the unanimous recommendation of the Austal Board and Austal shareholder approval.
Austal invests considerable time and resources into deciding whether it should grant a potential purchaser access to the Company’s otherwise confidential detailed financial records, forecasts and contracts as part of a due diligence process.
In doing so, it assesses a range of factors, including but not limited to the potential for shareholder value creation, competition concerns and a potential purchaser’s ability to ultimately complete a transaction (which would include necessary government approvals). This latter consideration is particularly relevant in relation to the proposal from Hanwha, given Austal’s position as the designer and builder of defence vessels for the Australian and US navies and ownership clauses associated with defence contracts. Austal also notes the announcement by the Australian Government on 23 November 2023 that Austal and the Department of Defence had executed a Memorandum of Understanding (MoU) to negotiate a Strategic Shipbuilding Agreement (SSA), under which Austal would be appointed as the Commonwealth’s strategic partner for vessels to be constructed in Western Australia.
In announcing the MoU for the SSA, the Commonwealth Department of Defence noted that “a sovereign and enduring naval shipbuilding and sustainment industry at Henderson is central to the Government’s commitment to ensuring continuous naval shipbuilding in Australia and delivering the capabilities needed to keep Australians safe.”
The Austal Board, together with its advisers, has considered the Indicative Proposal in detail and engaged with Hanwha in relation to whether the transaction described in the Indicative Proposal would obtain the relevant regulatory approvals in Australia and the USA to enable it to proceed. At present Austal is not satisfied that these mandatory approvals would be secured, however the company is open to further engagement if Hanwha is able to provide certainty on whether a transaction would be approved.
Austal shareholders are not required to do anything in relation to the Indicative Proposal.
This ASX announcement has been approved and authorised for release by the Board of Austal Limited.
Media Contact:
Cameron Morse +61 433 886 871
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Questions around this news
What did Hanwha propose?
Hanwha submitted an unsolicited, conditional, non-binding indicative proposal to acquire Austal through a scheme of arrangement. Under the proposal, Austal shareholders would receive $2.825 in cash for each share. Austal said it remains open to further discussions if Hanwha can provide certainty about whether the required regulatory approvals would be granted.
What approvals and other conditions apply to the proposal?
The proposal is conditional on due diligence, several regulatory approvals—including Australian and US reviews—final approval by Hanwha’s board, a unanimous recommendation from Austal’s board, and approval by Austal shareholders. Austal said it was not satisfied that the mandatory regulatory approvals would be secured at the time of the announcement.
Why did Austal raise concerns about regulatory approval?
Austal said it designs and builds defence vessels for the Australian and US navies, and that ownership clauses in defence contracts are relevant to whether a deal could proceed. It also noted that the proposal would need approvals in Australia and the United States, and said it was not then satisfied those approvals would be obtained.
What is a scheme of arrangement in a company takeover?
A scheme of arrangement is a court-supervised process that can be used to implement a transaction such as a takeover. It generally requires approval from the affected shareholders and the court, and may also depend on other conditions set out for the transaction. The precise process and requirements depend on the relevant jurisdiction and circumstances.
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- APPOINTMENT OF NON-EXECUTIVE DIRECTOR
