Temasek said to discuss potential sale of Keppel stakes in M1, Keppel Reit

SINGAPORE (BLOOMBERG) - Temasek Holdings is discussing options for portfolio companies Keppel Corp and Sembcorp Industries, ranging from divesting their non-core assets to selling shares, as the two Singaporean rig builders grapple with the oil-price slump, people with knowledge of the matter said.

Temasek is weighing the possibility of Keppel selling its 19.1 per cent stake in wireless operator M1 and paring its 44.6 per cent interest in office landlord Keppel Reit, the people said, asking not to be identified as the information is private. Keppel's holdings in the two firms are worth a combined S$1.6 billion at current market prices, according to data compiled by Bloomberg. 

Temasek executives also discussed the possibility of Keppel and Sembcorp Industries selling stock through rights offerings, the people said. The options, presented on Monday during a regular Temasek meeting to review its portfolio companies, focused on how Temasek can preserve the value of its investments amid a downturn in the oil-rig sector and will be shared with the two companies' boards, the people said.

Orders at Keppel and Sembcorp Marine, the world's No. 1 and No. 2 maker of oil rigs, dropped in 2015 to their weakest level in six years as falling crude prices crimped demand for drilling equipment. The two companies also face cancellation risks from a major client in Brazil, which is embroiled in a corruption probe and has not been able to pay the two Singapore companies since November 2014.

Any action would need to be decided and approved by the companies' boards, according to the people. Temasek is the largest shareholder in the two conglomerates, with a 21 per cent stake in Keppel and a 49.5 per cent holding in Sembcorp Industries, data compiled by Bloomberg show.

The Temasek team told executives at the state investment company that the rig-building industry outlook is likely to remain weak for the next three years, and Temasek may be called on to support any moves taken by Keppel or Sembcorp Industries, the people said. Brent crude, the benchmark for most of the world's oil, has fallen 39 per cent in the past year and last week hit the lowest level since 2003.

Temasek declined to comment in an e-mailed statement. Representatives for Keppel and Keppel Reit did not comment. A spokesman for Sembcorp Industries did not immediately respond to an e-mail and phone call seeking comment, while a representative for M1 declined to comment.