Hanwha Abandons Austal Takeover Bid Amid Due Diligence Dispute

Korean conglomerate Hanwha has officially withdrawn its takeover bid for Australian defense shipbuilder Austal, citing insurmountable obstacles in conducting due diligence.

Following the acquisition of the former Daewoo Shipbuilding and Engineering (DSME) shipyard by the Hanwha Group in 2023, the conglomerate has been undertaking an effort to bolster its global influence in shipbuilding.

This latest development marks the end of a year-long courtship between Hanwha and Austal that began in September 2023.

Hanwha CEO Hyek Woong Kwon, in a scathing letter to Austal, accused the company of reneging on agreed operational visits “without prior notice or explanation.” The situation further deteriorated when Austal demanded an unprecedented USD $5 million termination fee from Hanwha, payable if Austal deemed regulatory approval unlikely.

“This is unprecedented in the context of a public markets transaction, and is a wholly unreasonable condition on due diligence access,” Kwon stated.

Austal, a key player in defense vessel construction for both Australian and U.S. navies, faces stringent regulatory scrutiny for any potential ownership changes.

An Austal spokesperson defended the company’s stance, stating, “When Austal informed its shareholders in April that it had received an indicative, conditional, non-binding offer from Hanwha, the company was very clear that the Austal board and advisers were not satisfied that mandatory approvals for the transaction to proceed could be secured by Hanwha,” the spokesperson said.

In addressing shareholders in April, Austal said that Hanwha’s proposal hinged on several conditions, including due diligence and regulatory approvals from both Australian and U.S. authorities. The company also highlighted its recent Memorandum of Understanding with the Australian Department of Defence, aimed at negotiating a Strategic Shipbuilding Agreement.

Ultimately, Austal’s board was not satisfied that the mandatory approvals for Hanwha’s proposal could be secured, but remained receptive to further discussions if Hanwha could guarantee regulatory approval.

The failed acquisition attempt underscores the challenges in international defense industry transactions, where national interests often clash with corporate strategies.