Keppel and Sembcorp Marine to Merge To Create A Massive Oil-Rig Builder

Posted on 04/28/2022

Keppel Corporation Limited and Sembcorp Marine Ltd entered into definitive agreements for the proposed combination of Keppel Offshore & Marine Ltd (Keppel O&M) and Sembcorp Marine. The Proposed Combination is set to create a premier global player focusing on offshore renewables, new energy and cleaner solutions in the offshore & marine sector. Both Keppel Corporation Limited and Sembcorp Marine Ltd are controlled by Singapore’s Temasek Holdings. Upon completion of the transaction, which is subject to approval by shareholders and regulators, Temasek Holdings will own 33.5% of the combined entity. Temasek will abstain from voting on the deal.

Under the agreement, Keppel Corporation will receive S$ 500 million from Keppel O&M and a 56% share of the new company on a post-issue basis. Keppel will distribute 46% of the combined entity’s shares in-specie to its shareholders and retain a 10% stake. To finance this cash component, Keppel O&M has entered into a commitment letter with DBS Bank Ltd. for financing arrangements of up to S$ 500 million.

Other Concurrent Agreements
Concurrent with the merger, Keppel has entered into a definitive agreement with Baluran Limited and Kyanite Investment Holdings Pte Ltd, an indirect wholly-owned subsidiary of Temasek, for the sale of Keppel O&M’s legacy rigs and associated receivables to a new and separate entity (“Asset Co”). Baluran is indirectly wholly-owned by ASM Connaught House Fund V (“CHF5”). CHF5 is managed by Argyle Street Management Limited, and has TIH Investment Management Pte Ltd, a wholly-owned subsidiary of Mainboard-listed TIH Limited, as its investment advisor. As consideration for the sale of the legacy rigs and associated receivables to Asset Co, Keppel will receive a combination of ordinary shares, vendor notes and perpetual securities issued by Asset Co. Keppel, Baluran and Kyanite will hold stakes of 10.0%, 74.9% and 15.1% respectively in Asset Co. Separately, Asset Co and Keppel O&M will enter into a master services agreement under which the Combined Entity, through Keppel O&M, will provide construction, berthing and maintenance, and other associated services for the legacy rigs held by Asset Co for an initial period of 10 years. In addition, Keppel and the Combined Entity will continue to explore opportunities for future collaboration in areas such as floating data centers and floating infrastructure solutions.

Financial Advisors
J.P. Morgan (S.E.A.) Limited is the Sole Financial Advisor to Keppel. Credit Suisse (Singapore) Limited is the Sole Financial Advisor to Sembcorp Marine.

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