Australia Approves Hanwha’s Increased Stake in Defense Shipbuilder Austal

Australia’s Foreign Investment Review Board has approved South Korean shipbuilder Hanwha Corporation to increase its direct equity shareholding in Austal Limited from 9.9 percent to 19.9 percent, marking a significant development in cross-border defense industry partnerships.

The approval comes with strict conditions regarding Hanwha’s access to sensitive information and potential board nominations, though Austal has not yet been formally advised of the specific terms. Federal Treasurer Jim Chalmers granted the approval through HAA Pty Ltd, an entity controlled by Hanwha.

Hanwha currently holds a 9.9 percent direct equity shareholding in Austal, plus an additional 9.9 percent economic interest through a cash-settled total return swap. The South Korean conglomerate initially acquired its stake in March 2025 and has publicly expressed interest in partnering with Austal on shipbuilding opportunities and seeking a board position.

“Treasurer Chalmers has made his decision and we respect that decision,” said Austal CEO Paddy Gregg. “With the clarity provided by this decision, the Board and management are firmly focused on delivering value for all Austal shareholders as Australia’s sovereign shipbuilder under the Strategic Shipbuilding Agreement, a major contributor to the US defence industrial base, and with significant growth opportunities at our US and Australasia operations.”

The Australian shipbuilder emphasized its strong financial position, having delivered record revenue of AUD $1.8 billion and EBIT of $113 million in fiscal year 2025. The company projects continued growth with EBIT guidance of $135 million for fiscal 2026, which would represent another record. Austal’s order book exceeds $13 billion and is expected to grow further upon signing of Australia’s Landing Craft Medium and Landing Craft Heavy programs.

The decision holds particular significance given Austal’s strategic importance to both Australian and American defense capabilities. Through its American subsidiary Austal USA, the company operates as a major U.S. military shipbuilder and defense contractor, deriving approximately 80 percent of its revenue from U.S. operations. The company maintains facilities in Mobile, Alabama, San Diego, and Charlottesville, Virginia.

Austal’s board indicated it will carefully review any official partnership and board position requests from Hanwha before determining whether such arrangements would benefit all shareholders. Key considerations include feedback from design partners, efficient board operations given discussions of sensitive national security topics, potential governance and security requirements, and the impact of adding a non-independent director.

The approval comes amid uncertainty regarding U.S. regulatory clearance. Austal has not received correspondence from the Committee on Foreign Investment in the United States regarding the maximum shareholding level approved for Hanwha—whether 19.9 percent or 100 percent—and now considers such clarification unlikely. Any future change of control transaction beyond 19.9 percent would require separate approvals from Australian authorities and the US Defense Counterintelligence and Security Agency.

Hanwha has gained significant traction in the U.S. market, emerging as a key partner in the Trump Administration’s efforts to revitalize U.S. shipbuilding and restore maritime dominance to better compete with China. The company acquired Jones Act shipbuilder Philly Shipyard for $100 million in December 2024 and this year announced a $5 billion investment to expand production capacity at the yard from 2 to up to 20 vessels per year. Hanwha also made history as the first Korean shipyard to secure a U.S. Navy vessel maintenance contract.

This latest development follows an unsuccessful attempt by Hanwha to acquire Austal entirely in 2024.

The partnership potential comes at a time when the U.S. shipbuilding industry faces significant challenges with delays and cost overruns affecting naval fleet maintenance and construction.

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