Keppel Corporation signs definitive agreements in connection with proposed combination of Keppel O&M and Sembcorp Marine
Keppel Corporation Limited (Keppel) has entered into definitive agreements with Sembcorp Marine Ltd (Sembcorp Marine) for the proposed combination of Keppel Offshore & Marine and Sembcorp Marine (the Combined Entity), setting in motion the creation of a premier global player providing offshore renewables, new energy and cleaner solutions in the offshore & marine sector, according to the company's release.
The proposed combination will unlock synergies by bringing together the strong track records and capabilities of the two companies, putting the Combined Entity in a strong position to expand and compete more effectively in its areas of focus amidst the energy transition. It is also expected to further strengthen Singapore’s position as a maritime and offshore & marine hub.
Under the terms of the combination framework agreement between (amongst others) Keppel Corporation and Sembcorp Marine, the Group will receive equity shares representing a 56% equity interest in the Combined Entity (which will be listed as a separate listed entity) as well as cash of S$500 million. This values Keppel O&M, on a pro forma basis, at approximately S$4.87 billion, excluding the extraction of the S$500 million cash, its interests in certain out-of-scope assets with a book value of approximately S$300 million as at 31 December 2021 (comprising mainly Floatel International Ltd and Dyna-Mac Holdings Ltd) which will be retained by Keppel Corporation, as well as the legacy rigs and their associated receivables which will be sold to Asset Co.
When the proposed combination is successfully completed, Keppel will distribute to its shareholders 46% of the equity shares in the Combined Entity, thus allowing shareholders to enjoy the upside from synergies created through resource optimisation and capital allocation, and the recovery of the O&M business and the opportunities in the energy transition, through their stakes in the strengthened Combined Entity.
Keppel will deposit the remaining 10% of the Combined Entity’s shares into a segregated account for certain identified contingent liabilities. This segregated account will be terminated no later than 48 months from the completion of the proposed combination, or as soon as these contingent liabilities have either been dismissed or fully resolved and settled. The balance amount in the segregated account will then be returned to Keppel after making payments to the Combined Entity, if any. Similarly, the Combined Entity also undertakes to reimburse Keppel in cash for actual payments, if any, made in respect of certain identified contingent liabilities associated with Sembcorp Marine for a period of no more than 24 months from the completion of the proposed combination.
Keppel has concurrently signed a definitive agreement with Baluran Limited (Baluran), an indirect wholly-owned subsidiary of ASM Connaught House Fund V[3], and Kyanite Investment Holdings Pte Ltd (Kyanite), an indirect wholly-owned subsidiary of Temasek, for the sale of Keppel O&M’s legacy completed and uncompleted rigs and the receivables associated with certain legacy rigs to a separate Asset Co. Baluran and Kyanite (the external investors) will respectively own 74.9% and 15.1% of Asset Co. Keppel will hold a 10% equity interest in Asset Co and receive vendor notes and perpetual securities. The combined value of approximately S$3.93 billion in vendor notes, approximately S$0.12 billion in perpetual securities and the 10% equity interest in Asset Co is approximately S$4.05 billion.
Asset Co, which will be independently managed from the Combined Entity and Keppel, will maintain, complete and monetise the rigs over time for repayment of the vendor notes and perpetual securities. Asset Co will also enter into a master services agreement with the Combined Entity, through Keppel O&M, for the completion of certain uncompleted rigs and the provision of other services. The external investors of Asset Co will provide capital for completing uncompleted rigs, which would no longer be funded by Keppel.
The two proposed transactions, which are inter-conditional and being executed concurrently, will be subject to relevant regulatory and shareholder approvals, which are expected to be completed by the end of 2022.
Keppel Corporation is one of Singapore’s flagship multinational companies with a global footprint in more than 20 countries. Keppel provides solutions for sustainable urbanisation, focusing on four key areas comprising energy & environment, urban development, connectivity and asset management.