At a time when Sino-Australian relations are strained, Austal, the world's largest high-speed ship builder, suddenly decided to sell all 40% of its shares in Aolong Boat, its only joint venture in China, which also means that Austal has completely withdrawn from the Chinese market. At the same time, Austal, which has withdrawn from the Chinese market, will strengthen cooperation with the United States and other Southeast Asian defense and business partners.
Do not make money? Austal will sell all shares of Aolong Boats and exit the Chinese market
On April 28, Austal announced that it intends to sell 40% of Aolong Boats.
Aolong Boat is a joint venture company established with Jianglong Boat Technology Co., Ltd. It is the only Chinese-related company under Austal. In the five years since its establishment, Aolong Boats has successively built 12 commercial passenger ferries.
Austal stated in the announcement: “Austal Boats was established in June 2016 to seek opportunities in the commercial passenger and non-military ship market in Mainland China. Austal has authorized some of its verified commercial aluminum ship designs in Mainland China. It is sold and built in the shipyard of Jianglong Boats in Guangdong Province. Jianglong Boats brings local shipbuilding infrastructure, experience and expertise, and nearly 1,000 employees at the two shipyards support the joint venture. "
Austal spokesperson told the Australian media that the reason for the sale of the shares was that the development of the shipbuilding business in China did not meet the expectations of establishing a joint venture five years ago. "Austal's focus is to enter the steel and shipbuilding industry in the United States, and to develop our defense and commercial business in Southeast Asia, so we cannot give the Chinese joint venture the attention and funds needed for the development."
Although Austal’s announcement did not disclose the specific reasons for the sale of the shares of Aolong Boats, the authoritative Australian financial media AFR believes that when Austal decided to sell the shares, the trade and political relations between China and Australia are further tense. Australian companies are struggling with strategy. Infrastructure-related partners are facing strict scrutiny.
On April 22, Jianglong Marine Technology Co., Ltd. also issued an announcement regarding the signing of the "Letter of Intent", announcing that it would acquire 40% of the equity of the joint venture Austal Marine Technology Co., Ltd. held by Austal.
The announcement stated that Jianglong Boats signed a "Letter of Intent" with Austal Holdings China Pty Ltd on April 22. Based on the strategic development needs of both parties, after friendly negotiation between the two parties, Jianglong Marine has reached an agreement on the acquisition of 40% of Austal's equity in Austal and subsequent cooperation between the two parties.
The agreement of intent is the initial intention of the two parties for the purchase of equity and subsequent cooperation, and is the basis for further negotiations between the parties. The two parties preliminarily determined based on the 2020 year-end financial report submitted to the audit by Austal, that the price of 40% of Austal's equity held by Austal is RMB 20 million. Both parties agree that it is best to complete the equity transfer before June 30, 2021 but at the latest before October 31, 2021.
It is understood that Aolong Boat was established on June 22, 2016, with a registered capital of 5000 trillion yuan. Jianglong Boat and Austal hold 60% and 40% of the equity respectively. The main business of Aolong Boats is the design, manufacture and sale of various types of self-produced aluminum alloy yachts, high-performance boats and related after-sales services.
According to the unaudited financial report as of December 31, 2020, the total assets of Aolong Boats are about 122 million yuan, the total liabilities are about 70.87 million yuan, the net assets are 50.95 million yuan, the operating income is 158 million yuan, and the net profit is 17.94 million yuan. yuan.
According to the agreement of intent, Jianglong Marine and Austal agreed to continue to maintain cooperation in design, technical support, sales and marketing on domestic and foreign merchant shipping projects (within the scope of Australian export licensing rules) after the equity transfer. Austal will continue to provide merchant ships with ship design and technical support in accordance with the "Design and Development Agreement" signed with Aolong Boats based on one matter, one discussion and similar terms.
Jianglong Marine stated that the signing of the "Letter of Intent" is based on the company's strategic development needs. The company intends to achieve consolidated financial statements through the acquisition of the shares of Aolong Boats, and to improve the company's core competitiveness through strategic layout and enhance the company's profitability.
The only foreign prime contractor of the U.S. Navy! Will take over the Subic Shipyard in the Philippines
It is reported that Austal is the world's largest high-speed ship builder and Australia's largest defense exporter. Its business includes the design and construction of merchant ships and defense ships, and it is Australia's largest defense exporter. In the past 30 years, Austal has built and delivered more than 300 ships for more than 100 commercial and defense operators in 54 countries and regions around the world.
According to the International Shipping Network, after divesting the shares of Jianglong Boats, Austal will focus on its shipyard facilities in Australia, the United States, the Philippines and Vietnam. According to Austal's statistics in February, Austal's hand-held orders totaled 2.9 billion Australian dollars (approximately US$2.25 billion), and a total of 38 new ships under construction, most of which are defense ships.
It is worth mentioning that Austal is the only foreign prime contractor that designs, builds and maintains ships for the US Navy. Last June, the U.S. Department of Defense invested $50 million to upgrade Austal's Mobile Shipyard in Alabama and improve its ability to build steel ships for the U.S. Navy.
At the time, Goldman Sachs analysts pointed out that the support of the U.S. Department of Defense reaffirmed Austal's position in the U.S. Naval Industrial Base and strengthened its survival position after the Littoral Combat Ship (LCS) shipbuilding program. Goldman Sachs believes that the U.S. Navy does not have too many shipyards to choose from outside of Austal. The U.S. Department of Defense's investment will promote support for the company, allowing it to be a key supplier and have greater flexibility in bidding by increasing steel production capacity.
Austal Alabama Shipyard has been awarded the US Navy’s aluminum alloy material Littoral Combat Ship (LCS) and Expeditionary Express Transport Ship (EPF) construction contracts until 2024. In March of this year, Austal announced that it had signed a $235 million contract with the U.S. Navy to be responsible for the detailed design and construction of the 15th expeditionary express carrier (EPF). In addition to the EPF project, Austal USA also signed a contract with the US Navy to deliver 19 independent-class littoral combat ships (LCS). Since 2012, the American company Austal has delivered 12 EPFs to the U.S. Navy, all of which were delivered on time by the shipyard in Mobile, Alabama as planned and budgeted. In addition to the EPF project, Austal America also signed a contract with the US Navy to deliver 19 independent-class Littoral Combat Ships. Of these, 13 combat ships have been delivered, the other 5 are in different stages of construction, and 1 has been contracted but construction has not yet started.
In addition, Austal also plans to take over the bankrupt Hanjin Heavy Industries Philippines Subic Shipyard. Last year, Austal Shipyard formed an alliance with Cerberus Capital Management, a US private equity firm, and finalized a contract with the Philippines to acquire Subic Shipyard. At that time, it was reported that Austal and Cerberus participated in the bidding for the Subic Shipyard all the way through the control of the Pentagon.
According to the plan of the Philippine government, about one-third of the Subic Shipyard will be converted into a Philippine naval base. This plan was endorsed by Austal. At present, Austal’s shipyard in Cebu, Philippines has plans to build 6 patrol ships for the navy, while the Subic shipyard can be used to build larger ships such as frigates to further strengthen ties with the navy.
Subic Bay, where the Subic Shipyard is located, has an extremely important geographical location. Subic Bay is 110 kilometers away from Manila, the capital of the Philippines, and only 250 kilometers away from the disputed Huangyan Island between China and the Philippines. It controls an important international waterway along the Strait of Malacca towards the Bashi Strait. In addition, Subic Bay is located in the middle of the western coastline of the Philippines. After going out to sea, it can simultaneously proceed to the offshore islands of South China, such as Dongsha and Xisha. It is a strategic frontier for monitoring and controlling the South China Sea.
Subic Bay was once the largest U.S. military base overseas until the closure of the U.S. military base in 1992. Since then, Subic Bay has become an industrial center, but naval vessels of other countries, including the United States, will still dock there from time to time.
Due to its location, once the military base rebuilt by the Subic Shipyard is established and garrisoned, the Philippines will be closer to the southern waters, making it easier for ships to sail. In addition, the sea area surrounding the Subic Shipyard is relatively deep, allowing large-tonnage warships, submarines and aircraft carriers to be docked. Military experts point out that there is no doubt that the biggest beneficiaries of the naval base after the completion of the naval base are the Philippines and the United States.
In the announcement, Austal did not disclose the specific reasons for withdrawing from the Chinese market, but some experts said that as the relationship between China and Australia continues to deteriorate, Australian companies are facing strict federal government scrutiny in business related to strategic infrastructure. In addition, as a member of the Five Eyes Alliance, Australia obviously has to look at the most American face, so abandoning the Chinese market is a helpless but "correct" choice for Austal.
