A unit of conglomerate Keppel Corp.and Sembcorp Marine—both controlled by Singapore state-linked investment firm Temasek—have agreed to merge to create the world’s largest builder of oil rigs.
The transaction was finalized nearly a year after the Singapore-listed companies announced in June 2021 that they’re discussing the possibility of combining their offshore and marine engineering (O&M) businesses as both entities seek to benefit from the shift towards cleaner and renewable sources of energy.
“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 and marine sector,” Keppel CEO Loh Chin Hua said in a jointstatement. “It brings together two leading O&M companies in Singapore to create a stronger player that can realize synergies and compete more effectively amidst the energy transition.”
Upon completion of the transaction, which is subject to approval by shareholders and regulators, Temasek will own 33.5% of the combined entity. Temasek will abstain from voting on the deal. As part of the agreement, Keppel O&M will divest its legacy oil rigs business and associated receivables into a separate entity that will be owned by investors including Keppel Corp and a unit of Temasek.
Keppel and Sembcorp Marine’s O&M businesses have been hard hit by the drastic reduction in oil and gas exploration activities in recent years as energy companies pivot towards the production of cleaner and renewable energy. The Covid-19 pandemic exacerbated the situation, driving both companies into the red last year, with acombined net loss of S$1.3 billion, as oil demand and prices plunged.
Upon completion of the transaction, which is subject to approval by shareholders and regulators, Temasek will own 33.5% of the combined entity. Temasek will abstain from voting on the deal. As part of the agreement, Keppel O&M will divest its legacy oil rigs business and associated receivables into a separate entity that will be owned by investors including Keppel Corp and a unit of Temasek.
So, the company entity is expected to be a premier global player in the offshore sector with upward stock price.
Source: SG Investors
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