Sembcorp Marine gets SGX nod for $4.5 billion acquisition of Keppel O&M

SINGAPORE - Sembcorp Marine (Sembmarine) has received in-principle approval from the Singapore Exchange (SGX) for its proposed

$4.5 billion acquisition of Keppel Offshore & Marine (Keppel O&M).

The mainboard-listed, offshore energy engineering and support services specialist will next seek approval from its shareholders at an extraordinary general meeting (EGM), the circular for which is expected to be dispatched by Tuesday.

Under the proposed deal, which is subject to shareholder approval, Sembmarine will effectively buy the entire Keppel O&M stake from Keppel Corp for some $4.5 billion, excluding legacy rigs and associated receivables.

Sembmarine will issue up to 36.8 billion Keppel O&M consideration shares.

This is a revised deal, announced late last year, and leaves Sembmarine with 46 per cent of the combined entity. Keppel Corp gets the remaining 54 per cent.

The revised deal is $378 million lower than the previously proposed one-for-one share exchange between the combined entity and Sembmarine, which valued Keppel O&M at $4.87 billion, and translated into an exchange ratio of 44 per cent for Sembmarine and 56 per cent for Keppel.

The announcement of the Sembmarine-Keppel O&M SGX approval comes after Keppel shareholders gave their nod to the deal on Dec 8, with an overwhelming vote of 99.96 per cent.

If approved by Sembmarine’s shareholders at the upcoming EGM, the merger will create one of the world’s biggest offshore energy engineering giants with an order book of some $20 billion.

Analysts reckon the revised ratio of 46 to 54 has significantly increased the chances of the deal receiving Sembmarine shareholder approval. This is because Sembmarine shareholders will now have a slightly larger 46 per cent in the combined entity, compared with 44 per cent under the previous arrangement, while Keppel will have its stake reduced to 54 per cent.

Analysts in October upgraded their target valuations for Sembmarine, citing better deal certainty and a stronger order book of $18 billion for the enlarged entity.

The two companies first announced the merger to form what could be one of the world’s largest offshore energy players in April 2022, as offshore drilling projects dwindled amid a global transition towards renewable energy.

“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,” Keppel said then.

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, Keppel chief executive Loh Chin Hua said at the time.

Sembmarine chairman Mohd Hassan Marican said a merger would add resilience to the company by giving it larger operational scale, broader geographical footprint and enhanced capabilities, enabling it to better capitalise on opportunities in the offshore and marine, renewable and clean energy sectors.

Shares of Sembmarine closed flat at 14.1 cents on Monday, with just over 91 million shares changing hands, while Keppel closed at $7.56, up by a slight 0.13 per cent.