Keppel, Sembcorp Marine to explore merger of Keppel O&M with Sembcorp Marine

KEPPEL Corp and Sembcorp Marine have signed a non-binding memorandum of understanding (MOU) to enter into exclusive talks with the aim of merging Keppel Offshore & Marine (O&M) and Sembcorp Marine.

If the proposed transaction is successfully completed, the combined entity will be a listed entity, in which Keppel will receive shares and a cash consideration of up to S$500 million.

Keppel said in a media release on Thursday that it intends to distribute the shares in the combined entity to its shareholders. The key terms of the transaction, however, are still being discussed.

Meanwhile, Keppel has also signed a non-binding MOU with Kyanite Investment Holdings, a wholly-owned unit of Temasek, to sell Keppel O&M's legacy rigs, completed and uncompleted rigs and associated receivables to a separate asset company, which would be majority owned by external investors. Keppel will hold a maximum stake of up to 20 per cent in the asset company.

These two proposed transactions will be inter-conditional.

The merger would create a stronger player in the O&M sector over the long term, in response to dramatic changes in the global O&M engineering and energy sectors, Keppel said. The O&M sector has been hit by a drop in oil exploration and development activities, exacerbated by the global pandemic and the massive plunge in oil prices in 2020, as well as a global transition away from oil.

Keppel added: "The combined entity will be better positioned to capitalise on the energy transition including areas such as offshore wind, and address the opportunities and challenges in the evolving and consolidating offshore & marine industry."

Under the MOU between Keppel and Sembcorp Marine, Keppel and the combined entity will enter into a strategic partnership, with Keppel holding 50 per cent of a joint venture that will be set up between itself and the combined entity so that Keppel can continue to tap Keppel O&M's capabilities for its projects.

Shares in Keppel and Sembcorp Marine were halted from trading on Thursday, ahead of the announcements.