Austal and Hanwha: WA shipbuilder in the dark on Government’s ‘strict conditions’ on increased stake

The Federal Government is keeping Austal in the dark over the conditions applied to South Korean conglomerate Hanwha’s successful bid to double its stake in the WA naval shipbuilder.

Federal Treasurer Jim Chalmers on Friday finally handed down his call on Hanwha’s application to lift its shareholding to 19.9 per cent in the $2.6 billion Austal, approving the increase after “extensive consultation and long and careful deliberations”.

Austal was not consulted during the lengthy Foreign Investment Review Board process and has consistently pushed back against Hanwha, which unsuccessfully attempted to interest the company in a $1 billion takeover bid last year.

Dr Chalmers said his approval of Hanwha’s increased stake was subject to “strict conditions”, including limits on access to sensitive intellectual property held by Austal and “stringent criteria” on any nominee appointed to the Austal board.

However, the conditions have not been shared with Austal, much to the company’s surprise.

“My understanding of the process is that it is confidential between the Treasurer and Hanwha, which is a little surprising because it’s all about Austal,” Austal chief executive Paddy Gregg told journalists.

Japan has expressed concern about Hanwha’s presence on the Austal share register, given the company is in line to build eight Mogami-class frigates at Henderson for the Royal Australian Navy under contract from Mitsubishi Heavy Industries.

Mr Gregg reiterated on Friday that it can protect Mitsubishi’s intellectual property from its rival South Korean defence contractor, insisting that “a board seat does not give you access” to the company’s technical information or IT systems.

“I’m 100 per cent confident that we can satisfy any demands that Mitsubishi Heavy Industries have around data, storage of data, access to data and protection of their intellectual property,” he said.

“I’m guessing but I would have presumed that the Government would spoken to Mitsubishi or the Japanese about that.”

Mr Gregg said Austal respected Dr Chalmers’ decision, recognising it was a tough one as he tried to balance encouraging investment from a respected regional ally with protecting the Federal Government’s ambition to develop a sovereign Australian shipbuilding industry.

“It’s a sensitive topic,” Mr Gregg said. “The Treasurer’s job is to attract investment to Australia, but he also needs to safeguard the interests of Australia.”

Hanwha has yet to ask for a board seat, but Andrew and Nicola Forrest’s investment vehicle Tattarang currently has two seats on Austal’s seven-member board on the basis of its 19.3 per cent shareholding.

Mr Gregg said Austal would consider any request for board representation “would be taken on its merits” and “we’d absolutely want to understand the risks and opportunities associated with that”.

Austal shares were nearly four per cent lower at $6.18 as at 12.25pm.

More to come.