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Sembmarine to demerge from Sembcorp Industries, announces $1.5bn rights issue

Singapore shipyard group Sembcorp Marine (Sembmarine) is to be demerged from its parent Sembcorp Industries and undertake a SGD2.1bn ($1.51bn) rights issue.

Announcing the demerger of the two Singapore-listed companies a statement said it would allow Sembmarine and Sembcorp Industries to better focus on their respective industries.

Concurrently Sembmarine announced a SGD2.1bn 5 – 1 renounceable right issue at a price of SGD0.20 per share to recapitalise the shipyard group. Sembcorp Industries has undertaken to subscribe to SGD1.5bn of the rights issue by setting off the SGD1.5bn outstanding under its Subordinated Loan extended to Sembcorp Marine, while Temasek Holdings has agreed o sub-underwrite the remaining SGD0.6bn.

Sembcorp Industries shareholders to receive between 427 and 491 Sembmarine shares for every 100 Sembcorp Industries shares owned.

Wong Weng Sun, president & ceo of Sembcorp Marine, said: “We believe that the Rights Issue will give us much needed financial strength to ride through the prolonged industry downturn and prepare for recovery. This recapitalisation will improve our cash position, fund ongoing financial commitments, strengthen our balance sheet and ensure long-term viability.”

The statement noted that Sembmarine had been doubly hit by the Covid-19 pandemic and collapse in the oil price.

Under Singapore’s partial lockdown for Covid-19, known as a circuit breaker, since 7 April offshore and marine work has been suspended, although ship repair has been allowed to continue as an essential service. However, Sembmarine also saw its available workforce slashed from 20,000 to 850 due to the quarantine of foreign worker dormitories affected by the outbreak.

The news is almost certain to re-ignite market talk of a merger between Sembmarine and its main Singapore rival Keppel Offshore & Marine which has been the subject of on-and-off rumours for many years. Keppel O&M parent Keppel Corp recently unveiled its long term strategy – Vision 2030 – which ceo Loh Chin Hua said would “pave the way for Keppel to be a powerhouse solutions provider for sustainable urbanisation”.

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