Shares of Australian shipbuilder Austal Ltd. saw a significant boost on Tuesday following news that a subsidiary of South Korea’s defense giant Hanwha Aerospace Co. had acquired a substantial stake in the company. The acquisition, which marks Hanwha’s continued expansion into the US defense sector, has seen Austal’s stock climb 7.6% in Sydney, closing at a higher value after Hanwha’s purchase of a 9.9% stake in the US Navy contractor.
Hanwha’s strategic move includes plans to increase its holding to 19.9% in the Australian company, signaling the South Korean defense firm’s ambitions to strengthen its presence in the US and global markets. The acquisition aligns with Hanwha’s broader strategy to capitalize on the growing global demand for defense and shipbuilding services, particularly in the United States.
Intelligence analyst Eric Zhu noted that the acquisition “signals Hanwha’s ambition to broaden its global reach, particularly in the US.” He highlighted that Austal’s US operations could play a crucial role in fulfilling the Pentagon’s shipbuilding needs, especially given the Biden administration’s focus on the sector.
The deal, which saw Hanwha purchase 41.2 million Austal shares at A$4.45 each—representing a 16% premium over Monday’s closing price—reflects the rising importance of defense and shipbuilding contractors in the face of shifting global security dynamics. Hanwha’s strong performance on Asia’s equity benchmark, with its stock more than doubling this year, further underscores the company’s growing influence.
Jung In Yun, CEO of Fibonacci Asset Management Pte, suggested that Hanwha’s stake in Austal could enhance both South Korea’s and Australia’s ability to secure military contracts from the US. “It’s a win-win for both countries,” Yun explained, emphasizing the potential for better negotiation positions with the US government.
Austal, which derives nearly 80% of its revenue from the US, operates a major unit in Mobile, Alabama, with service centers in San Diego and a technology center in Charlottesville, Virginia. The company’s strong ties to the US defense sector make it an attractive partner for Hanwha as it seeks to secure contracts with the US Navy.
Yun also pointed out the strategic advantage for South Korea and Australia, with the two countries’ combined technological expertise—such as Australia’s advanced submarine technology—positioning them as formidable competitors in the defense sector. “The US could benefit from lower prices through competition between Australia and South Korea,” he added, “but now that they’ve joined forces, they’re in a stronger position for negotiations.”
Despite the challenges facing US shipyards, which have struggled with delays and cost overruns, Hanwha’s investment in Austal and its recent purchase of a former Navy shipyard in Philadelphia through its unit Hanwha Ocean Co. could help bridge gaps in the US shipbuilding industry’s capabilities.
Hanwha’s previous attempt to acquire Austal in 2023 was unsuccessful, though the company continues to engage in discussions with Austal’s management to explore future acquisition possibilities.
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