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UPDATE 6-Austal rejects Hanwha's $662 mln offer citing regulatory hurdles

(Adds Hanwha Ocean's regulatory filing, paragraph 14)

By Scott Murdoch and Heekyong Yang

April 2 (Reuters) - Australian shipbuilder Austal said on Tuesday it had rejected an A$1.02 billion ($662 million) takeover offer from South Korea's Hanwha Ocean as it was unlikely to be approved by Australian and U.S. regulators due to the sensitivity of its operations.

The Western Australia-based firm said it had received a bid at A$2.825 per share, representing a premium of 28.4% to Austal's last closing price.

Austal's shares rose 8.2% in early trade, while the Australian S&P/ASX200 index was flat.

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The firm signed an initial agreement with the Australian government in November which would see the company being selected as a strategic shipbuilder.

Austal is also a prime contractor designing, constructing and sustaining ships for the U.S. Navy.

The company said on Tuesday it thought it was unlikely Hanwha's bid in its current form would receive approval from Australian and overseas regulators.

The approvals needed would include Australia's Foreign Investment Review Board (FIRB), the Committee on Foreign Investment in the U.S. (CFIUS) and the U.S. Defense Counterintelligence and Security Agency.

Hanwha Group is South Korea's seventh-largest conglomerate with 80 trillion won ($59.11 billion) in assets, spanning the energy, defence and financial industries.

It said it was willing to accept all reasonable conditions to receive FIRB approval and it had been advised by a global law firm that CFIUS should not object to the deal.

"Austal is a national asset and thus can only be sold to companies within the AUKUS alliance countries (US-UK-Australia)," said an Hanwha spokesperson.

"But South Korea maintains a close military cooperation relationship with the U.S. and Australia, including conducting numerous joint exercises, as it is an important ally of both countries."

Austal said government approval "is particularly relevant in relation to the proposal from Hanwha, given Austal's position as the designer and builder of defence vessels for the Australian and U.S. navies and ownership clauses associated with defence contracts."

"The company is open to further engagement if Hanwha is able to provide certainty on whether a transaction would be approved," Austal said in a statement.

Hanwha Ocean said in a regulatory filing late on Tuesday that it is "trying to continue discussing the deal with Austal's management and board of directors, but no discussions are underway at this moment."

Austal's market capitalisation before the bid stood at nearly A$800 million.

($1 = 1.5411 Australian dollars)

($1 = 1,353.4500 won) (Reporting by Scott Murdoch in Sydney and Heekyong Yang in Seoul; Additional reporting by Shivangi Lahiri in Bengaluru and Joyce Lee in Seoul; Editing by Stephen Coates, Christopher Cushing, Shri Navaratnam, Michael Perry and Sonali Paul)