As I said in a previous thread, my starting assumption is;

1. ASB will be taken out
2. It will be done above book value

ASB is basically an American shipbuilder with an Australian name and an Australian operation that is significantly smaller.

That's important because I think it plays into the takeover dynamics that are at play: Hanwha primarily wants the American shipyards and I suspect Tattarang's only real interest is the Australian shipyards.

Hanwha is being courted by the US Navy to invest in American ship manufacturing because, according to the US Navy, South Korean shipbuilders are the world's best. Earlier this year, US Secretary of the Navy, Carlos Del Toro, visited South Korea and Hanwha, trying to drum up investment. This article is from the US Navy's own website. They are obviously quite smitten with Hanwha. For a shipbuilder the size of Hanwha, they really can only move the needle meaningfully by investing in the US. Austal seems like a logical way to enter that market; contracts already in place, shipyards in place – basically a turn key purchase rather than starting from scratch. And relatively (and justifiably) cheap compared to Huntington Ingalls.

Releases

Tattarang, on the other hand, seems to favour investment in Australia focused businesses. It's sort of a collection of corporate Australiana, but as far as I can see from their website it has no investments in companies with significant overseas operations, except ASB – and this seems to be by design. This article about Tattarang's CEO in the AFR gives a bit of flavour into what they prioritise.

Add to that, last year there were at least rumours that Tattarang wanted a deal of some sort to eventuate. I'm not sure I believe that Forrest is a seller of the entirety of ASB, but maybe they are. Seems weird a buyer like Forrest would have built the stake only to sell it a couple of years later. That's why I think some sort of breakup is a legit outcome of any sale process.

And we have from early April this from the AFR

So bringing it all back, we have:

1. Hanwha is a committed buyer
2. Tattarang seem to at least be open to some sort of deal
3. The reg hurdles that ASB used to prevent Hanwha doing DD have melted away

I don't really know what a deal looks like or if one even eventuates, but there is a lot of smoke....It's hard to believe nothing comes of it.

And finally on Friday an article from ASPI popped up about ASB

https://www.aspistrategist.org.au/hanwha-ocean-buying-austal-would-probably-suit-the-united-states/

You might like to note that Hanwha has a cosy relationship with Bisalloy (BIS) as well.

BIS are the only manufacturers of Quench & Thirst (Q&T) steel which goes into armour plate of tanks and the bushmasters, so popular in Ukraine etc. Plus, it is a significant additive to the hulls of the AUKUS subs if & when they become a reality. And reality took a step closer then they (BIS) were awarded with a research contract to test their hull strengths which quite possibly might see our Q&T exported to overstretched USA and UK ship yards.

My belief is that all these companies which have a defence bias will be (and should be) protected by the government. We were unprepared for war in WW2 with our steel exported to Japan to then return as bullets and bombs. Being an island continent we can be easily cut off, so we need to have onshore capabilities. Certainly both Austal and BIS have defence clearance thus far as I suspect BSL would have too. So put these 3 in your trifecta in the defence stakes over a mile and three!

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