Keppel Corporation and Sembcorp Marine’s S$4.5 Billion Merger Has Been Revised: 5 Things You Need to Know

The Smart Investor2022-11-02

The merger process says that SMM will acquire Keppel O&M but Keppel will end up owning more of the combined entity.For shareholders of both Keppel Corporation Limited (SGX: BN4) and Sembcorp Marine ...

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Comments

DARKSAMARU
2022-11-03
DARKSAMARU
‌[思考] ‌
Braight
2022-11-02
Braight
In the meantime, small retail investors will end up with odd lots again, harder to buy/sell..
winnieheng
2022-11-02
winnieheng
Yessss

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From a merger to an acquisitionBefore this revision, the transaction between Keppel O&M and SMM was structured as a merger.SMM had to transfer its listing status to a new entity before combining with Keppel O&M.But with the new deal, the process has been greatly simplified.SMM will now directly acquire Keppel O&M from Keppel Corporation.There is no requirement for a transfer of listing status and no need for a transfer of SMM’s listing status that would have required consent by a 75% majority.Instead, SMM will retain its listing status and directly issue shares to Keppel Corporation in consideration of its purchase of Keppel O&M.In effect, the process is simplified.Source: Sembcorp Marine’s Presentation SlidesWhen the transaction is concluded, Temasek Holdings will continue to remain the largest shareholder of SMM with an approximate 35.5% ownership, down from its present 54.6% stake.Keppel Corporation will own 54% of the enlarged SMM but will distribute 49% of its stake as a distribution-in-specie to its shareholders while retaining a 5% stake.In short, while the process says SMM will acquire Keppel O&M, Keppel will end up owning more of the combined entity.2. A better deal for SMMSMM’s shareholders will also be getting a better deal with the revision of the deal.2. A better deal for SMMThe equity value exchange ratio between SMM and Keppel O&M has improved from 44:56 to 46:54.This change in this ratio means that SMM’s cost of acquiring Keppel O&M has reduced by S$378 million, with the former having to fork out S$4.5 billion instead of S$4.87 billion for the latter.Consequently, SMM will need to issue 36.8 billion shares to Keppel Corporation to satisfy the consideration for the acquisition, down from the previous 39.9 billion.SMM currently has around 31.4 billion shares in issue, so the reduction of 3.1 billion shares to be issued means shareholders of SMM will suffer less dilution.After the revised deal is concluded, SMM will have a total of 68.2 billion shares in issue.3. Creating an enlarged offshore and marine giantSince the transaction was first envisioned, the O&M and renewable energy sectors have witnessed significant improvement.Both Keppel Corporation and SMM have announced order wins that have boosted their respective order books.The rationale for the acquisition, however, remains.A larger SMM will be better positioned to capture growth opportunities as it will have the necessary scale and clout.The enlarged entity will have a greater than S$18 billion order book along with more than 30 projects under execution.It can participate across the value chain for offshore renewables and collaborate with industry players to explore new energy solutions.The offshore wind energy and oil and gas solutions markets are projected to reach S$260 billion and S$290 billion, respectively, by 2030, giving SMM ample growth opportunities to capture contracts in these spaces.4. Continuing the relationshipMeanwhile, Keppel Corporation will enter into an agreement with a subsidiary of Temasek to sell its O&M division’s legacy rigs and associated receivables to a new entity called AssetCo.These rigs and receivables will not be part of the enlarged SMM and are excluded from the transaction.However, AssetCo will work with Keppel O&M under a master services agreement whereby the enlarged SMM will provide construction, berthing, and maintenance for an initial period of 10 years.Elsewhere, Keppel Corporation and SMM will also continue to explore opportunities to collaborate in areas such as floating data centres and floating infrastructure solutions.5. A slew of approvals still requiredDespite the changes in terms, both companies still require a slew of approvals for the deal to go through.SMM requires more than 50% of its shareholders to approve the deal while Keppel Corporation’s shareholders need to give the green light for both the disposal of Keppel O&M and the distribution-in-specie.Other approvals are also required from the Singapore Exchange, Maritime Port Authority of Singapore (MPA), as well as the courts (on anti-trust issues).Both companies plan to hold extraordinary general meetings soon to seek the relevant approvals.Investors will need to wait till early next year to see the outcome of this deal.But with the conditions reduced and the deal structure simplified, there is a high chance it will carry through.","kind":"news","is_publish_news":true,"is_publish_highlight":true,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","news_tag":"","news_rank":0,"symbols":[],"gpt_button":1},"commentList":[{"id":9985421338,"gmtCreate":1667442212425,"gmtModify":1676537919055,"author":{"id":"3586214032719642","authorId":"3586214032719642","name":"DARKSAMARU","avatar":"https://static.tigerbbs.com/9a731acebf737eb5a4a29e88be9f5996","vip":1,"crmLevel":3,"crmLevelSwitch":0,"idStr":"3586214032719642","authorIdStr":"3586214032719642"},"htmlText":"‌<a href=\"\">[思考]&nbsp;</a>‌","listText":"‌<a href=\"\">[思考]&nbsp;</a>‌","text":"‌[思考] ‌","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":2,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/9985421338","repostId":1131895073,"repostType":4,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"},{"id":9985849568,"gmtCreate":1667358321355,"gmtModify":1676537904419,"author":{"id":"4092636508632360","authorId":"4092636508632360","name":"Braight","avatar":"https://community-static.tradeup.com/news/4b5f0f885df87d1e51db27cb96dd749e","vip":1,"crmLevel":2,"crmLevelSwitch":0,"idStr":"4092636508632360","authorIdStr":"4092636508632360"},"htmlText":"In the meantime, small retail investors will end up with odd lots again, harder to buy/sell..&nbsp;","listText":"In the meantime, small retail investors will end up with odd lots again, harder to buy/sell..&nbsp;","text":"In the meantime, small retail investors will end up with odd lots again, harder to buy/sell..","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":1,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/9985849568","repostId":1131895073,"repostType":4,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"},{"id":9985851209,"gmtCreate":1667356917101,"gmtModify":1676537904140,"author":{"id":"3581561299942930","authorId":"3581561299942930","name":"winnieheng","avatar":"https://static.tigerbbs.com/d99694d509d4963475350f0639eb04ad","vip":1,"crmLevel":3,"crmLevelSwitch":0,"idStr":"3581561299942930","authorIdStr":"3581561299942930"},"htmlText":"Yessss","listText":"Yessss","text":"Yessss","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":4,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/9985851209","repostId":1131895073,"repostType":4,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"}],"isCommentEnd":false,"newsSizeData":{"likeSize":52,"commentSize":3,"repostSize":0,"favoriteSize":1,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.29.3","shortVersion":"4.29.3","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/1131895073"}