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Keppel and Sembmarine in talks on combining offshore and marine businesses

Photo: Keppel Keppel Shipyard _LNG.jpg
One of the longest speculated mergers in Singapore marine – a bringing together of Keppel Offshore & Marine and SembCorp Marine – moved a step closer to reality on Thursday non-binding Memorandum of Understanding (MoU) to explore a potential combination.

Both Keppel O&M and Sembmarine have been hit by a prolonged downturn in the offshore and marine with a sharp drop in demand for offshore oil and gas assets, the impact of the Covid-19 pandemic, and a shift towards clean energy.

In January this year Keppel Corp announced it was exiting the rigbuilding business and exploring options for it’s offshore and marine business which included a possible sale or merger.

The MoU will discuss entering a strategic partnership, with Keppel holding 50% of a 50-50 joint venture between Keppel and the combined entity comprising Keppel Offshore & Marine and Sembcorp Marine. Shareholding of the combined entity is undecided and key terms are still under discussion. The combined entity would aim to accelerate the pivot towards clean energy which both offshore and marine groups are currently undertaking and be better positioned to bid for larger contracts.

If the combination goes ahead it would not include Keppel legacy rigs. Keppel signed a non-binding MoU with Kyanite Investment Holdings, a wholly owned subsidiary of Temasek Holdings, with a view to sell Keppel O&M’s legacy rigs completed and uncompleted rigs and associated receivables to a separate asset company.

Wong Weng Sun, President & CEO of Sembcorp Marine, said: “Our industry is undergoing rapid change and becoming increasingly complex as a result of the accelerated pace of transition to a green economy. In this current landscape, we recognise that there could be significant benefits to explore a Potential Combination.

“We will be undertaking a comprehensive due diligence process to help us determine if the Potential Combination will create significant synergies, secure and enhance the value of our business, promote green growth and is in the best interest of our shareholders.”

Loh Chin Hua CEO of Keppel Corp said: “Keppel started out more than five decades ago as a small ship repair yard. We are very proud of our O&M heritage and business, which had yielded almost SGD8 billion in net profits for the Group over the decade from 2006-2015.

“The proposed combination would create a stronger player that can compete more effectively. It builds on the organic transformation of Keppel O&M, which we had announced at the start of the year, to enhance its competitiveness and relevance in the evolving international landscape.”

Nagi Hamiyeh, Joint Head, Investment Group, and Head, Portfolio Development of Temasek, said: “We believe that the Potential Combination, if it occurs, will help the combined entity accelerate its pivot to the energy transition, including offshore renewables and hydrogen related opportunities, while maintaining and further developing the talent and capabilities that have been built over the years by both companies in the O&M sector.”

The two companies said that discussions were at a preliminary stage with talks expected to take several months.