Keppel O&M, Sembmarine merge to form new firm

This comes amid talks on a proposed combination between Keppel Offshore & Marine (O&M) and Sembmarine. PHOTOS: KEPPEL CORP, SEMBCORP MARINE

SINGAPORE - Sembcorp Marine (Sembmarine) and Keppel Offshore & Marine (O&M) are merging to form what could be one of the world’s largest offshore energy players worth $8.7 billion.

The move, which comes around a year after the two companies began talks, is seen as an effort to revive the fortunes of these home-grown giants, which have suffered in recent years.

Battered by an oversupply in the market, a shrinking pool of projects and the global transition towards renewable energy, the two hope that combining their operating and engineering capabilities will help them create value.

The recent upturn in oil prices has also raised hopes of winning new orders.

In a widely awaited announcement on Wednesday (April 27), Sembmarine and Keppel Corp announced the creation of a new company (NewCo) based on a 50:50 enterprise value ratio between Keppel O&M and Sembmarine.

After taking into account the respective capital structures of the two firms, the $500 million cash Keppel O&M will pay to Keppel and other adjustments, Keppel will end up owning 56 per cent of the combined entity, while Sembmarine shareholders will own 44 per cent.

Singapore state investor Temasek will become the single largest shareholder of NewCo, with a 33.5 per cent stake.

Sembmarine will undergo an internal restructuring exercise whereby its shareholders will exchange their shares for shares in NewCo on a one-for-one basis.

It will then transfer its listing status on the mainboard of the Singapore Exchange to NewCo.

Keppel’s O&M unit, one of the world’s largest rig-builders, and Sembmarine own a network of shipyards and employ almost 20,000 workers between them.

Asked if the merger would lead to job cuts, Keppel chief executive Loh Chin Hua said: “It doesn’t mean that it will automatically lead to job cuts. There are a lot of opportunities from the merger… new areas which the companies are not individually in now. So, we can create a bigger pie.”

Keppel pointed to the opportunities that the merger could yield. “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,” it said.

NewCo will go to the market as one of the world’s largest offshore and marine energy players, with $6.4 billion worth of orders and revenue of $3.9 billion.

The move will also help Keppel realise about $9.4 billion in value.

This comprises $4.9 billion from Keppel O&M’s combination with Sembmarine, $500 million in cash and $4.05 billion from the sale of Keppel O&M’s legacy rigs and associated receivables to Asset Co. 

Mr Loh added: “It brings together two leading O&M companies in Singapore to create a stronger player that can realise synergies and compete more effectively amid the energy transition.”

Sembmarine chairman Mohd Hassan Marican said the merger would add resilience to the company amid dramatic changes in
the industry.

“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,” he added.

The proposed combination is subject to regulatory approvals and expected to be put to respective shareholders for approval in the fourth quarter of this year.

Join ST's Telegram channel and get the latest breaking news delivered to you.