Sembcorp Marine to merge with Keppel arm

Temasek will become the largest shareholder in the combined offshore & marine company, with a 33.5% stake

SINGAPORE: Singapore’s Sembcorp Marine (Sembmarine) has agreed to a multi-billion dollar merger with Keppel Corp’s larger offshore and marine unit, a year after the Temasek-backed firms began deal talks to cope with an industry downturn.

The loss-making oil rig builders have been whiplashed by years of oversupply and oil price volatility as well as a drop in new orders.

Such troubles have been exacerbated by the global transition towards renewable energy, consolidation at Chinese and South Korean rivals and major disruptions during the Covid-19 pandemic, when oil prices fell.

The downturn increased competition for a shrinking pool of projects, driving up industry debt levels and leading Sembmarine to raise S$3.6 billion (RM11.37 billion) of equity over the past two years, with strong backing by Singapore state investor Temasek.

Temasek, Sembmarine’s majority shareholder, will ultimately become the largest shareholder in the combined company, with a 33.5% stake.

As part of the merger, Keppel and its shareholders will own 56% of the merged entity, while Sembmarine’s shareholders will own the rest.

Sembmarine was valued at S$4.1 billion as of Tuesday’s closing price and its listing will be used for the combined entity.

Keppel said it would distribute 46% of the merged entity’s shares in-specie to its shareholders and retain a 10% stake.

Shares in both companies were halted from trading yesterday.

Analysts have called for industry consolidation for years. Sembmarine demerged from parent Sembcorp Industries in 2020, helping pave the way for the Keppel deal.

Sembmarine and Keppel have a network of shipyards in Singapore and overseas, between them employing nearly 20,000 people.

The companies declined to comment on the potential for job cuts.

JPMorgan is the financial adviser to Keppel on the deal, while Credit Suisse is the financial adviser to Sembmarine.