Sembcorp Marine (S51.SI) has called off plans to merge with rival Keppel O&M, in favour of buying the company outright in a deal worth $3.2bn.
The Singaporean offshore engineering giant announced Thursday that it would buy 100% of the offshore and maritime (O&M) business from parent conglomerate Keppel.
The two had announced a proposed merger deal in April aimed forming one of the world’s largest offshore energy players, worth a combined $6.3 billion.
After Asian yards were hit hard by the impacts of COVID-19, the tie up was billed as helping the resulting company seek opportunities not just in oil and gas, but in renewable energies, such as offshore wind and hydrogen.
However, the terms left shareholders of both entities questioning whether the deal would dilute the value of their holdings.
The new approach eschews previous plans to create a new combined company and with it, the need for approval of 75% of the group’s shareholders by value.
It will also be faster – reducing the transaction closing time by “up to two months” – and reportedly cheaper, with an equity value exchange ratio that lowers the overall valuation to around S$4.50 billion ($3.2bn) from the earlier S$4.87bn ($3.45bn) – a saving of some $270m.
If approved, the deal could potentially close by the end of the year. Sembcorp Marine said it intends to hold an extraordinary general meeting in December 2022 or January 2023 to ratify the transaction.
Following completion, Sembcorp Marine will retain its listing status on the Singapore exchange and issue new Sembcorp Marine shares to Keppel directly.
Keppel O&M will then become a wholly owned subsidiary, while Keppel will retain 5% of the enlarged Sembcorp Marine shares as its retained stake, instead of 10% as proposed under the original merger deal.
Meanwhile parent Temasek will see its stake in Sembmarine fall from 54.6% to 35.5%, but will remain its largest shareholder.
“Amidst these volatile and uncertain times, the parties believe that it is critical for the proposed combination to be completed as soon as possible so that the benefits of an enlarged entity can be realised sooner,” Sembcorp said.
“Besides the expected synergies, an enlarged Sembcorp Marine will be in a better position to deal with the above challenges and compete against the global competition,” it added.
Sembmarine chairman Tan Sri Mohd Hassan Marican added: “With the Proposed Combination, we hope to preserve Singapore’s marine and offshore engineering ecosystem and the industry’s core capabilities developed over the decades by two home grown companies that have become established global players.”
“An enlarged Sembcorp Marine is better positioned to advance Singapore’s O&M and maritime interests and augment the sector’s potential as a growth engine for the economy, providing jobs and business opportunities; as well as spearhead the nation’s expansion into the adjacent offshore renewables and new energy markets, in tandem with the global transition to a low-carbon economy.”