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The first-in-class National Security Multi-Mission Vessel, NSMV 1, aka Empire State VII, is floated out of dry dock at Philly Shipyard. Photo: courtesy of RADM Alfultis

The first-in-class National Security Multi-Mission Vessel, NSMV 1, aka Empire State VII, is floated out of dry dock at Philly Shipyard. Photo: courtesy of RADM Alfultis

Philly Shipyard Sold to Hanwha for $100 Million

Mike Schuler
Total Views: 24405
June 20, 2024

U.S. shipbuilder Philly Shipyard will be sold to South Korean conglomerate Hanwha in a deal value at $100 million. The confirmation comes after months of rumors that the two parties were exploring an acquisition.

Oslo-based Philly Shipyard ASA announced Tuesday it has agreed to sell Philly Shipyard, Inc., its sole operating subsidiary, to Hanwha Systems and Hanwha Ocean, two Hanwha subsidiaries, via a share purchase agreement (SPA) with a cash consideration of $100 million.

The agreement will see the first Korean shipbuilder with operations in the U.S.

The transaction marks the end of Aker Capital AS’s two-decade stewardship of Philly Shipyard, formerly known as Aker Philadelphia Shipyard. Aker Capital AS is a wholly-owned subsidiary of the Norwegian holding company, Aker ASA.

“Reflecting on the past 17 years, I am personally grateful for the opportunity to have worked side by side with the people of Philly Shipyard and eagerly anticipate witnessing the shipyard’s continued growth and success in the future,” said Kristian Røkke, Chairman of Philly Shipyard ASA.

Hanwha Ocean, previously Daewoo Shipbuilding and Marine Engineering (DSME), is one of South Korea’s “big three” shipbuilders. Following DSME’s acquisition by the Hanwha Group in 2023, the conglomerate has been undertaking an effort to bolster its global influence in shipbuilding, most recently with a bid to acquire Australian shipbuilder Austal, which was ultimately rejected. Philly Shipyard has a history of using Korean designs in their shipbuilding.

Philly Shipyard, based in Philadelphia, Pennsylvania, is known for being one of the few American shipyards capable of constructing ocean-going ships in compliance with the Jones Act. Currently, the shipyard is engaged in several commercial and government projects with a backlog until 2027, including the construction of five federal training and humanitarian ships for the U.S. Department of Transportation’s Maritime Administration. Commercial projects include an offshore wind Subsea Rock Installation Vessel (SRIV) for Great Lakes Dredge and Dock and three 3,600 TEU containerships for U.S.-based shipping line Matson.

The transaction is subject to approval by the Committee of Foreign Investments in the US (CFIUS) and other regulatory authorities. Pending the satisfaction of all closing conditions, the deal is expected to be finalized in the fourth quarter of 2024.

The acquisition comes as U.S. Navy Secretary Carlos Del Toro has been pushing for Korean investment to help revitalize commercial and naval shipbuilding facilities in the United States. Del Toro’s recent visit to South Korea, where he met with Hanwha executives, was part of his Maritime Statecraft initiative. This initiative aims to restore the U.S. as a comprehensive maritime power to counter China’s aggressive global shipbuilding dominance.

“Hanwha’s acquisition of Philly Shipyard is a game-changing milestone in our new Maritime Statecraft. This will bring good paying union jobs to Philadelphia, a city with a 250-year relationship with the U.S. Navy,” said Secretary Del Toro. “Knowing how they will change the competitive U.S. shipbuilding landscape, I could not be more excited to welcome Hanwha as the first Korean shipbuilder to come to American shores—and I am certain they will not be the last.”

Philly Shipyard said in a statement that the board of directors will outline the company’s future strategy and structure, including plans for the use of proceeds, following the completion of the transaction.

The acquisition comes during a period of transition for Philly Shipyard. After delivering two containerships to Matson in 2019, the shipyard shifted its focus to government newbuild and repair contracts due to a lack of Jones Act newbuild orders. The yard caught a break in early 2020 when it won the contract for the National Security Multi-Mission Vessels from Tote Services, on behalf of MARAD. The shipyard marked its return to commercial work in 2021 after receiving the contract for a Subsea Rock Installation Vessel from Great Lakes Dredge & Dock, followed by the follow-up order from Matson in 2022. However, the shipyard continues to face pressure to increase its order backlog beyond 2027.

Arctic Securities has verified the fairness of the transaction from a financial perspective.

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