Sembcorp Marine and the offshore and marine (O&M) arm of Keppel Corp have revised their plans for a merger in a move expected to simplify the transaction.
Under the revised agreement Sembcorp Marine will now directly buy over all of Keppel O&M’s stake from Keppel for SGD 4.5bn ($3.2bn).
The original deal involved a one-for-one share exchange between Sembcorp Marine and a combination of the two groups.
Sembcorp Marine said the simplified transaction structure reduces consent and approval requirements and may reduce time to completion by up to two months.
Under the revised terms, Sembcorp Marine has achieved an improvement in the equity value exchange ratio to 46% of the enlarged company, Keppel’s share will be reduced to 54%, against 44% under the earlier agreement.
The improved equity value exchange ratio translates to an 8% improvement from the previous Keppel O&M purchase consideration announced in April 2022.
This amounts to a SGD 378m reduction in the acquisition consideration for Keppel O&M to SGD 4.5bn from the earlier S$4.87 billion.
The number of new Sembcorp Marine shares to be issued will be reduced by 3.1bn, which is equivalent to about 10% of Sembcorp Marine’s market capitalisation.
Sembcorp Marine said it will retain its listing status on the mainboard of the Singapore Exchange and directly issue new Sembcorp Marine shares to Keppel, if approved by minority shareholders.
Post completion of the transaction, Keppel O&M will become a wholly-owned subsidiary of Sembcorp Marine.
Keppel Corp will retain 5% of the enlarged Sembcorp Marine shares under the new deal, instead of 10% and will distribute its remaining 49% stake of the enlarged company in-specie to its shareholders.
Sembcorp Marine said the revised structure and terms underscore the parties’ commitment to establishing the enlarged entity at the earliest possible time to better seize opportunities in the improving industry landscape.
“Since announcing the proposed combination on 27 April 2022, conditions in the O&M sector have improved, as evidenced by the recent orders won by both companies,” Sembcorp Marine said.
“However, macroeconomic conditions have deteriorated at the same time amidst elevated levels of inflation and continued interest rate increases by major central banks.
“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,” the company added.
Separately, Keppel Corp reported in a third-quarter update that revenue at Keppel O&M had grown by 56% year-on-year in the first nine months of 2022 to SGD 1.82bn and that it was “ebitda positive” for the period
In the first nine months of 2022, Keppel O&M secured SGD 7.9bn of new orders, bringing its net orderbook to SGD 11.6bn as of end-September 2022, which is at the highest level since 2007.
“Keppel O&M has also made good progress de-risking its legacy rig assets,” Keppel Corp said.
“All KFELS B Class jack-ups have been contracted to owners and charterers to date, while Keppel O&M continues to receive active enquiries for its remaining legacy rigs.”
