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Sembmarine spending $115m to buy remaining stake in PPL Shipyard

Sembmarine spending $115m to buy remaining stake in PPL Shipyard
Sembcorp Marine is spending around $115.06m to acquire a remaining 15% stake it did not own in PPL Shipyard (PPLS), putting an end to a bitter partnership that arose from this stake.

Sembmarine announced on Tuesday that it has entered into a sale and purchase agreement with PPL Holdings and E-Interface Holdings to acquire the 15% stake in PPLS, which designs, constructs, repairs oil rigs, ships and other ocean-going vessels.

PPL Holdings is a joint venture firm of which China’s Yangzijiang Shipbuilding holds 45% equity interest, and E-Interface is a wholly-owned subsidiary of PPL Holdings.

The completion of the sale and purchase agreement, targeted to take place on 29 August, will see PPLS become wholly-owned by Sembmarine.

The joint ownership of PPLS by Sembmarine and PPL Holdings turned sour when Baker Technology, which then owned the 15% stake in PPL Holdings, sold this stake to a consortium that included Yangzijiang in 2010.

Back in 2001, Sembmarine and PPL Holdings started PPLS as a 50-50 joint venture. In 2003, Sembmarine raised its stake in PPLS to 85% but voting rights between the two partners remained equal.

But the sale of the 15% stake owned by Baker Technology led to lengthy lawsuits with Sembmarine claiming then it had the right to buy the stake before the Chinese rivals.

Singapore-listed Yangzijiang also announced on Tuesday that “the disposal is undertaken by the group to realise its investment in PPLS” and that “the group intends to apply the net proceeds towards its working capital.”

The move by Yangzijiang followed the group’s rationalisation efforts amid very challenging conditions in the global shipbuilding market. The privately-owned Chinese yard has retrenched around 4,000 employees over this year and saw first half profit slashed by 50% year-on-year.

Meanwhile, Sembmarine said its investment in PPLS over the years has helped propel the company to be a global player in the design and construction of jackup and semi-submersible rigs.

“Since 2001 until 2015, PPLS has made cumulative profits of over SGD1.6bn. Cumulative cash dividends for the same period received by the company from PPLS amounted to approximately SGD540m,” Sembmarine stated.

“The acquisition will result in the company having full control of PPLS. This will enable the company to optimally manage the business, finance and resources of PPLS, and fully align the latter’s corporate strategies to the company to generate sustainable returns,” it added.