The Coalition government came to office in 1996 committed to a policy of selling government businesses, and ASC was high on the lists of businesses to be sold. Yet in 2000 the government took total control of ASC by buying Kockums' 49 per cent shareholding. This situation arose from the complex contractual relationships between ASC, Kockums and the Commonwealth, the reappearance of the German submarine builders HDW in the Collins story as the new owners of Kockums, and the decision of the navy and the capability team to look to the United States for help with the submarines.

With the end of the Cold War and the decline in submarine orders from the major Western navies, a rationalisation of the submarine industry was inevitable. Kockums approached both French and German submarine builders with suggestions of collaboration. Initially HDW spurned Kockums' approaches, but when it appeared that Kockums might align with the French to make a powerful competitor, and was also making headway in the competition to provide submarines for South Korea, HDW made a successful offer for Kockums.

The takeover of Kockums by HDW was completed in September 1999, immediately raising the question of the future of Kockums' shareholding in ASC. Tomy Hjorth, the chairman of ASC, felt the obvious buyer was HDW, as he believed a Swedish/German/Australian link could be a powerful force in conventional submarines. Hjorth says that when a delegation from HDW came out to Australia to look at ASC, their reaction was that they were doubtful about the business but were prepared to buy Kockums' shares.