Australia said on Friday it would not oppose a proposal by South Korea's Hanwha to nearly double its stake in Australian shipbuilder Austal, but the deal will be constrained by strict conditions covering data access and security.
Treasurer Jim Chalmers said the decision to allow the South Korean conglomerate to lift its shareholding to 19.9 from 9.9 per cent would ensure greater protections for Austal and uphold Australia's strategic and sovereign interests in the company.
"It follows a thorough and robust process that took account of all the relevant economic, national security and other national interest issues," Chalmers said in a statement.
"It incorporates advice from relevant agencies including the Department of Defence, the Department of Home Affairs, the Department of Foreign Affairs and Trade and our national security agencies."
Financial details of the transaction were not disclosed.
Trading in Austal shares was paused on Friday morning after the government's decision.
If Hanwha proceeds, it will face limits on access to and storage of sensitive information, as well as strict criteria for nominating any representatives to Austal's board, Chalmers said.
Hanwha previously signalled that it would want to partner with Austal on shipbuilding projects, and that it may seek a board position if its proposal was approved.
In a statement, Austal said: "The board will closely review the opportunities and risks associated with those partnership and board position requests, should they be made officially."
The ruling follows a technology and supply chain agreement signed last month between Austal and state-owned ASC, the submarine builder that will jointly build Australia's fleet of nuclear-powered submarines under the AUKUS defence pact between Australia, the US and Britain.
Hanwha said in June that it had received approval from the US Committee on Foreign Investment (CFIUS) to increase its shareholding in Austal to 19.9 per cent. Austal also supplies defence vessels to the United States Navy.
Hanwha, with interests in energy, defence and finance industries, would remain a minority shareholder in Austal and would be barred from taking its stake above 19.9 per cent, Chalmers said.
(Reporting by Renju Jose in Sydney; Editing by Jacqueline Wong)