Cerberus, JF Lehman circle Austal as JPMorgan restarts auction

afr.com:

It has been several months of silence at Austal, the ASX-listed shipbuilder which brought in JPMorgan to gauge interest in a buyout. Now it seems that two North American private equity firms – Cerberus Capital Management and JF Lehman & Company, are back and serious about a proposal.

Street Talk first reported that JPMorgan was working with Austal in June. Since then, there have been plenty of suitors in for a look at the company, which has lucrative contacts with the US Navy but is performing poorly. In August, Austal’s head of US operations abruptly left, and the company reported a loss of $13.8 million, down from a $79.6 million profit.

Despite the intense private equity interest, Austal still trades at a discount to US-listed shipbuilders including Huntington Ingalls, General Dynamics and Lockheed Martin. 

Others to have had an interest in Austal include Arlington Capital Partners and Hanwha, the South Korean conglomerate that operates in sectors ranging from explosives and aerospace to finance, energy and retail. The latter had hired Macquarie Capital to provide advice on a possible bid.

But sources said that Cerberus, a $US60 billion ($88 billion) alternative asset investor, was now most advanced in discussions. It is being advised by Citi and Gilbert+Tobin. JF Lehman, which specialises in investing in complex and regulated sectors, has engaged Morgan Stanley and Jones Day.

While the auction is slow-moving, it has been suggested that Austal may need to consider raising equity if it can’t find a buyer for the company. The shipbuilder’s largest shareholders are the Forrest family, with 19 per cent, and John Rothwell, the company’s founder and chairman, with 9 per cent.

Run by billionaire investor Steve Feinberg,