Australia Greenlights Korean Giant’s Expanded Stake in Naval Shipbuilder
Udumbara
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The government has announced it will not block a South Korean defence manufacturer’s bid to double its stake in an Australian-based shipbuilding company, but will impose “strict conditions” in response to Japanese concerns about the proposal.
Defence giant Hanwha is seeking to increase its shareholding in Austal—a major Australian naval shipbuilder—from 9.9 percent to 19.9 percent.
The South Korean public company was founded 73 years ago and recently announced earnings for the most recent 12-month period of 14,219 billion won (A$14.49 billion and US$9.66 billion), but its EBITA (Earnings Before Interest, Taxes, and Amortisation) was just 423,561,444 won (A$431,593/US$287,706).
It operates worldwide, with activities encompassing renewable energy, chemicals, advanced materials and defence.
Hanwha companies have been operating in Australia since 2005 in areas including mining, logistics, and sustainable energy, but with its push into the defence market, in 2019, it opened Hanwha Defence Australia, headquartered in Melbourne, where it already manufactures self-propelled artillery systems for the Australian Defence Force.
Treasurer Jim Chalmers announced on Dec. 12 he would not object to Hanwha’s increased stake, based on a recommendation from the Foreign Investment Review Board.
“My decision was not taken lightly and comes after extensive consultation and long and careful deliberation,” he said. “It follows a thorough and robust process that took account of all the relevant economic, national security and other national interest issues.”
Hanwha would remain the minority shareholder and would not be able to increase its stake beyond 19.9 percent. Chalmers said greater protections would be imposed through a “number of strict conditions” relating to governance and security.
These include limiting Hanwha’s access to sensitive information, restricting the storage of sensitive information, and imposing stringent criteria on any Hanwha nominee to Austal’s board.
Austal is expected to build Japanese vessels at Perth’s Henderson shipbuilding precinct after Mitsubishi Heavy Industries was selected to supply its upgraded Mogami-class frigate to the Royal Australian Navy for $10 billion.
Japan’s ambassador to Australia, Kazuhiro Suzuki, has previously said that if Hanwha’s bid to acquire more of Austal were successful, there would be “some reaction” in Tokyo due to tensions with South Korea and concerns about protecting intellectual property.
Ill-will between the two Asian countries stems from unresolved historical grievances, a recent trade war, and a dispute over ownership of Dokdo, also called the Liancourt Islands, a group of 91 small landmasses home to a population of about 26, situated in the Sea of Japan.
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Amid this conflict between the two Asian powers, Australia is seeking to deepen its defence ties with Tokyo amid rising concerns over Chinese aggression and the expansion of its military presence in the Indo-Pacific, while at the same time doing nothing to jeopardise its relationship with the Republic of Korea, which is Australia’s fourth-largest trading partner.
The two countries have signed a Comprehensive Strategic Partnership built on shared democratic values, significant trade, historical ties from the Korean War, and growing defence cooperation (including through AUKUS, in which South Korea is likely to become a Pillar II partner).
Defence Minister Richard Marles met with his Japanese counterpart, Shinjiro Koizumi, last week.
