Hanwha eyes U.S. warship market with $233 million investment in Austal

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Hanwha eyes U.S. warship market with $233 million investment in Austal

Published: 18 Mar. 2025, 18:00

LEE JAE-LIM
[email protected]

Audio report: written by reporters, read by AI

A view of Austal’s U.S. shipyard in Alabama [AUSTAL]

NEWS ANALYSIS

Korean conglomerate Hanwha is pressing ahead with the acquisition of Australia-based shipbuilder Austal, allocating 337.8 billion won ($233 million) in the investment to secure its position a substantial shareholder.

This move is part of Hanwha’s strategy to utilize one of the few certified U.S. warship manufacturers to broaden its footprint in the U.S. shipbuilding industry, expanding into the larger warship market amid intensifying geopolitical tensions between the United States and China.

Hanwha said Tuesday that its Australian subsidiary, HAA, had acquired 9.91 percent of Austal for 168.7 billion won in a bid to “seek strategic business partnership synergy” in an off-market transaction Monday.

The company said HAA held an additional 9.9 percent economic exposure to Austral under a total return swap agreement with an Australian securities firm, an interim step preceding share acquisition.

Hanwha intends to increase HAA’s holding to 19.8 percent to become Austal's majority shareholder, upon approval from the Australia’s foreign investment regulator, to which it has already submitted the transaction for review. Tattarang Ventures, an Australian investment firm, holds a 19.56 percent stake.

Hanwha Systems and Hanwha Aerospace injected 202.7 billion won and 64.2 billion won, respectively, into HAA through a paid-in capital increase to fund the acquisition of Austal shares, the two companies said in a separate regulatory filings on Monday.

Through the transaction, Hanwha Systems and Hanwha Aerospace own 60 percent and 40 percent, respectively, of the Australian entity.

Analysts state that the acquisition aims to gain leverage over Austal’s U.S. shipyard in Alabama to expand Hanwha Ocean’s military shipbuilding facilities in the United States, which will be backed by the two major shareholders.

“Austal’s U.S. subsidiary operates the shipyard that builds Independence-class Littoral Combat Ships for the U.S. Navy,” said Korea Investment & Securities analyst Kang Kyung-tae, adding that Hanwha will likely separate the shipbuilding duties of its Philadelphia-based shipbuilder Philly Shipyard, owned by Hanwha Ocean and Hanwha Systems, and its Alabama shipyard.

“Philly Shipyard is expected to be used to build commercial vessels, while Austal’s U.S. shipyard is for military shipbuilding.”

Although based in Australia, Austal derives 80 percent of its total revenue from the U.S. market, according to its full-year 2024 financial performance.

iM Securities analyst Byun Yong-jin interprets Hanwha’s move as a strategic one to show its commitment to substantial investment in the U.S. shipbuilding industry, aligning with the Donald Trump Administration’s long-term goal to revitalize the domestic maritime sector to eventually achieve self-sufficiency in both commercial and warship production.

“We can deduce that the number of ships eligible for foreign orders over the next 30 years is estimated at 111 vessels — an average of 3.7 ships per year, with an annual contract value between $4.6 billion and $5.8 billion, under the U.S. Navy’s 2025 shipbuilding plan,” Byun said. “Some of these orders may be allocated to Japan, but considering that Japan’s shipbuilding capacity is only about 30 percent of Korea’s, the majority of these contracts are expected to go to Korean shipbuilders.”

This is Hanwha’s secondary acquisition attempt at Austal in almost a year. In April 2024, Hanwha Ocean, the conglomerate’s shipbuilding subsidiary, offered 1.02 billion Australian dollars ($651.7 million) to wholly acquire Austal, which was scrapped upon rejection from Austal’s management, which cited regulatory challenges from the Australian and U.S. authorities.

“Since Hanwha Ocean’s role is more relevant to Austal’s shipyard operations, Hanwha would need to clarify further regarding Hanwha Ocean’s management of Austal’s defense shipbuilding projects,” Byun added.

BY LEE JAE-LIM [[email protected]]