Shipbuilding Shakeup Down Under

In November of 2006, Thales completed its takeover of ADI, forming what is now known as Thales Australia. By purchasing ADI, Thales was prohibited from completing in the acquisition of other Australian defense contractors. That opened the door for BAE, who announced today that they will be buying the Australian shipbuilder Tenix.

BAE Systems today completed its acquisition of Tenix Defence after receiving all required approvals. The company announced it had entered into a definitive agreement to acquire Tenix Defence on 18 January 2024 for up to A$775 million in cash.

The acquisition of Tenix Defence is a significant step in the implementation of BAE Systems' strategy to develop as the premier global defence and aerospace company through a multi-home market business focus.

While Europe is making major headway into the Australian defense market, we want to highlight that two specific American defense corporations really had no chance in this bid. It was essentially guaranteed to BAE, specifically because of the following two terms found in the official Australian government announcement is the primary reason why.

To protect Defence interests, BAE have provided specific assurances through a Deed with Defence relating to the amphibious ships contract, agreed between the Commonwealth and Tenix in October 2007.

The Deed also prevents BAE Systems from buying ASC Pty Ltd (formerly the Australian Submarine Corporation) if it is sold by the Australian Government.

Yes we are aware the link is broken, use Google Cache.

The first condition is important to Australia, but the second point is relevant to US shipbuilding. There is a third defense company for sale in Australia, and BAE essentially had no shot (from the perspective of the Australians) to acquire it, specifically ASC Pty. Ltd, also formally known as Australian Submarine Corporation.

It is the worst kept secret in the Australian defense establishment that ASC Pt, Ltd is going to be purchased by one of two companies, General Dynamics or Northrop Grumman, because Australia wants a US firm to build the next generation Collins class replacement, which will be built leveraging US technology.

The announcement of BAE buying Tenix is good news for Australia, but it is also good news for the US. While not easily visible from this announcement, in context it confirms what many have been thinking and hoping for: A US shipbuilder will buy AC Pt. Ltd in the future. Why does that make us optimistic? Because it means a US company will soon be building conventional submarines, even if it is in Australia.