Sembcorp Marine proposes S$1.5b rights issue, to explore merger with Keppel Offshore & Marine

SEMBCORP Marine is planning an additional S$1.5 billion rights issue to shore up its financial position and accelerate its pivot towards clean energy, it said in a filing to the Singapore bourse on Thursday evening.

In addition, it has inked a memorandum of understanding with Keppel Corp to explore a potential combination of Sembcorp Marine and Keppel Offshore & Marine.

Sembcorp Marine is proposing a fully committed, renounceable rights issue of up to 18.83 billion new shares on the basis of three new shares for every two existing shares held, at S$0.08 per share. This works out to a 35.7 per cent discount to the theoretical ex-rights price and a bigger 58.1 per cent discount to the counter's close at S$0.191 on June 23.

The rights issue is expected to be completed in the third quarter of this year, and comes on the heels of an earlier S$2.1 billion rights issue in September last year.

Temasek's wholly-owned unit, Startree, will subscribe for its 42.6 per cent pro-rata entitlement and apply for excess rights shares, such that it subscribes for up to 67 per cent of the rights issue. DBS will underwrite the remaining 33 per cent.

Sembcorp Marine said: "The board and management of Sembcorp Marine believe that the further recapitalisation via the rights issue is required to strengthen the group's balance sheet, address the temporary working capital depletion and replenish liquidity to meet the projected operational funding requirements through to end 2022. Specifically, proceeds from the rights issue will be used for working capital and other general corporate purposes, including debt servicing."

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The rights issue will also improve the group's net gearing from 0.75x to 0.25x on a pro-forma basis as of Dec 31, 2020.

An extraordinary general meeting (EGM) will be called in August for Sembcorp Marine to seek shareholders' approval for the rights issue. Startree has given its irrevocable undertaking to vote in favour of the rights issue at the EGM.

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