Sembmarine doubles down on merger rationale after shareholder campaigns against it

This comes ahead of a June 20 virtual dialogue session organised by the Securities Investors Association (Singapore). PHOTO: LIANHE ZAOBAO

SINGAPORE (THE BUSINESS TIMES) - Sembcorp Marine (Sembmarine) has issued a response to further shareholder queries where it once again reiterated the rationale and benefits of its proposed merger with Keppel Offshore and Marine (Keppel O&M).

This comes ahead of a June 20 virtual dialogue session organised by the Securities Investors Association (Singapore) which is slated to be held at 5pm, and after a minority shareholder, known as Mr Philip Loh, launched an online campaign against the proposed deal.

Through his website, Mr Loh dubbed the deal as "highly disadvantageous" to Sembmarine's minority shareholders, claiming the terms of the deal to be unfair.

In a recent post, he also posited that Sembmarine's share price is set to be driven "substantially higher" should the company believe minority shareholders will turn up in force to vote against the deal, as interested parties will have to buy up their shares to ensure the deal goes through.

Without the merger, Sembmarine said it will, as a standalone entity, have to navigate an "even more competitive landscape" - where it noted offshore players have sought consolidation or were otherwise "challenged by the radically changed fundamentals" of the business and needs of customers.

Highlighting the increased agility, technical strength and operational efficiencies of a combined entity, the group intends to offer offshore renewables, new energy and cleaner solutions in the O&M sector with the resultant "premier global player" it envisions.

The proposed combination also offers the best way forward for Sembmarine to play a long-term role in meeting the changing needs of its O&M customers, who themselves require new, cleaner energy solutions, said the company in a filing on Monday before the market opened.

"The combination with a restructured Keppel O&M allows Sembmarine to immediately step up in terms of scale, capabilities and operational reach to tap into opportunities and better compete on the global stage in the new energy era," added the group.

Based on illustrative financial year 2021 pro-forma metrics provided by the group in its June 20 statement, the combined entity would result in a combined net loss of $1.3 billion, but narrower loss per share (LPS) of 2.2 cents compared with Sembmarine's financial year 2021 LPS of 6.5 cents.

Net tangible assets (NTA) per share of the combined entity would be seven cents, as opposed to Sembmarine's NTA per share of 12 cents for the financial year.

Gearing of the combined entity will be lower, at 22 per cent on a pro forma basis, compared with 33 per cent for Sembmarine on a standalone basis.

The deal will be based on a 50:50 enterprise value ratio, which reflects the equal enterprise values of the two companies before taking into account their respective capital structures.

Keppel will own 56 per cent of the combined entity, while Sembmarine shareholders will own 44 per cent. Keppel will then distribute in-specie 46 per cent of the combined entity shares to its shareholders and retain a 10 per cent stake, which will be placed in a segregated account.

The illustrative NTA of the restructured Keppel O&M that is attributable to each Keppel share is about 47 cents for financial year 2021.

Sembmarine was down 0.5 cent, or 4.6 per cent, at 10.4 cents as at the midday trading break on Monday, after the group's latest announcement.

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