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Keppel Corporation and Sembcorp Marine sign agreements for proposed combination

27 Apr 2022

Keppel Corporation Limited (Keppel) and Sembcorp Marine Ltd (Sembcorp Marine) on Wednesday (27 April) said they have entered into definitive agreements today for the Proposed Combination of Keppel Offshore & Marine Ltd (Keppel O&M) and Sembcorp Marine. 

The Proposed Combination is set to create a premier global player focusing on offshore renewables, new energy and cleaner solutions in the offshore & marine sector, they said in a joint statement. 

The Proposed Combination, which follows the signing of a memorandum of understanding between Keppel and Sembcorp Marine on 24 June 2021, will bring together the world-class engineering capabilities, well-established track records and reputations for quality and reliability of the two companies with complementary competencies and operations.

The Combined Entity will be well-positioned to capture opportunities arising from decarbonisation in the oil and gas sector and from the global energy transition towards renewables, particularly in the areas of offshore wind, and new energy sources such as hydrogen and ammonia.

Summary of Transactions

The Proposed Combination involves the establishment of a new holding company (the Combined Entity) which will combine the businesses of Keppel O&M and Sembcorp Marine via separate schemes of arrangement. 

The development is based on a 50:50 enterprise value ratio between Keppel O&M and Sembcorp Marine. After taking into account the respective capital structures of the two companies, the S$500 million cash that Keppel O&M will pay to Keppel immediately prior to the closing of the transaction and other adjustments, the agreed equity value exchange ratio will result in Keppel and its shareholders owning 56% of the Combined Entity and Sembcorp Marine shareholders owning 44% on completion. 

It will be subject to the approvals of the shareholders of Keppel and Sembcorp Marine at separate extraordinary general meetings (EGMs), which are expected to be convened in the fourth quarter of 2022. 

The Combined Entity will adopt a new name and brand identity to reflect its focus on offshore renewables, new energy and cleaner solutions in the O&M sector. 

Loh Chin Hua, CEO of Keppel and Chairman of Keppel O&M, said: “The signing of a win-win agreement on the Proposed Combination of Keppel O&M and Sembcorp Marine marks a strategic milestone for the offshore & marine sector. It brings together two leading O&M companies in Singapore to create a stronger player that can realise synergies and compete more effectively amidst the energy transition. Together with the resolution of Keppel O&M’s legacy rigs, this is a major step forward in Keppel’s Vision 2030 journey, as we simplify our business and sharpen our focus on providing solutions for sustainable urbanisation.”

Tan Sri Mohd Hassan Marican, Chairman of Sembcorp Marine, said: “The Proposed Combination marks a major milestone in Sembcorp Marine’s strategic business transformation journey since 2015 to stay resilient amid dramatic changes in our industry. Sembcorp Marine and Keppel O&M are Singapore’s homegrown marine icons. I am confident the Combined Entity, with its larger operational scale, broader geographical footprint and enhanced capabilities, will create a leading Singapore player to capitalise on the opportunities in the offshore and marine, as well as the renewable and clean energy sectors.” 

Nagi Hamiyeh, Head, Portfolio Development Group at Temasek, said: “We are pleased that Keppel and Sembcorp Marine have come to an agreement on the terms of a combination that we think will be transformational for the companies. We believe the combined business will have the expertise and capacity to accelerate the pivot towards growing opportunities in the renewable and clean energy sectors, and pursue meaningful projects around the world that address the increasing need for greener and cleaner energy solutions. In doing so, it will be able to deliver long-term value creation for shareholders and other stakeholders. We look forward to the support of the shareholders of Keppel and Sembcorp Marine to make this possible.”

Note: The full details of the signed definitive agreements for the proposed combination can be found here

Related: Keppel and Sembcorp Marine discuss potential merger in pivot to renewables sector


Photo credit: Keppel Corporation and Sembcorp Marine
Published: 27 April, 2022

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