The Albanese government has formally recognised the Forrest family-backed Austal Limited (ASX:ASB) as a sovereign defence shipbuilder, bolstering its strategic standing amid an ongoing bid by South Korea’s Hanwha Group to expand its ownership in the company.
Austal confirmed on Tuesday that it had finalised a Strategic Shipbuilding Agreement (SSA) with the federal government, positioning the shipbuilder to compete for up to A$20 billion in defence work. The potential contracts cover landing craft in the first phase, followed by frigates and autonomous warships to be built at Austal’s Henderson shipyard, south of Perth.
This pipeline would complement Austal’s existing A$14 billion order book, largely underpinned by major contracts with the United States Navy at its Mobile, Alabama, shipyards.
Hanwha, which currently holds a 9.9% stake in Austal, is seeking approval to lift that to 19.9% and has also requested board representation. Its 2024 takeover proposal was previously rejected by Austal’s board. Federal Treasurer Jim Chalmers has yet to rule on Hanwha’s latest bid, with a decision from the Foreign Investment Review Board expected by early September.
“The government’s approval of the SSA is a defining moment for Austal. It will establish Austal Defence Australia as the Commonwealth of Australia’s strategic shipbuilder for Tier 2 vessels in Western Australia and reflects both Austal’s excellent defence shipbuilding record and the capabilities that Austal possesses to help the Australian Government to achieve its defence objectives," Austal CEO Paddy Gregg said:
“The Commonwealth seeks to ensure Australia’s Defence procurement possesses sovereignty and greater certainty and resilience across the naval ship supply chain in an increasingly complex strategic environment and in alignment with the Commonwealth’s continuous naval shipbuilding policies. Through the SSA, Austal is committed to helping the CoA meet these objectives while establishing Austal Defence Australia as the CoA’s shipbuilder of choice in WA.”
Meanwhile, Japan’s Mitsubishi Heavy Industries has been selected to build the Royal Australian Navy’s new A$10 billion fleet of major surface combatants, prevailing over Germany’s Thyssenkrupp Marine Systems in a competitive tender that will help shape Australia’s naval capability for decades.
Austal shares were last trading at A$6.79, up 5.76% at midday.