Keppel potentially the biggest winner from giant O&M merger

KEPPEL Corp could come out smelling like a rose from the landmark merger of its loss-making offshore and marine (O&M) arm with another ailing sector giant Sembcorp Marine (Sembmarine) - a deal that was precipitated by oil's prolonged slump up until recently.

Under the proposed merger unveiled on Wednesday, Keppel stands to pocket S$500 million in cash from Keppel O&M (KOM)  to settle outstanding interest and partial redemption of certain perpetual securities previously issued to Keppel - this will happen pre-merger - and is set to monetise the once-flailing rig business just as things are looking up, owing to a crude oil rally. Keppel will also get a bigger chunk of 56 per cent in the yet-to-be named combined entity, that is valued at S$8.7 billion.

Keppel chief executive and Keppel O&M chairman Loh Chin Hua's glee, albeit characteristically restrained, is hard to miss. "The proposed transactions will allow Keppel to realise about S$9.42 billion in value ... If successful, (they) are expected to be earnings accretive to Keppel for the financial year ended 31 Dec 2021 on a pro forma basis".