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Sembcorp, Sembmarine urge investors to vote in favour of demerger

SEMBCORP Industries (SCI) and Sembcorp Marine (SMM) are calling on their shareholders to vote in favour of the proposed S$2.1 billion recapitalisation for the offshore and marine engineering group, and a demerger from each other that will result in Temasek Holdings having a direct stake in the marine arm.

In a regulatory filing on Thursday morning, both companies asked their respective shareholders to submit their proxy forms to vote in favour of the resolutions tabled at the extraordinary general meeting (EGM) in order for the transaction to proceed.

At the upcoming EGMs on Aug 11, shareholders will vote on three resolutions: SCI's move to distribute its SMM shares in specie, SMM's undertaking of the rights issue, and a whitewash resolution that will waive investors' rights to receive a mandatory takeover offer from Temasek. All three resolutions require a simple majority, but are inter-conditional.

SMM said the rights issue will provide the company with the “much needed recapitalisation” to ride out the industry downturn, strengthen its balance sheet and reposition the company for its long-term viability.

The company also warned that shareholders who opt not to take up their rights entitlement will see their shareholdings diluted post the rights issue.

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“If shareholders do not approve the transaction, SMM’s strenuous efforts to recapitalise and strengthen its balance sheet will be negated and the critical need to address our liquidity requirements will fail,” said SMM.

SMM added that only a few of its bank facilities will be affected by a change in control. These banks collectively account for some S$6.03 billion of loan and trade facilities that have been extended to SMM thus far.

SMM noted that these banks are supportive of the transaction, and have indicated the continuation of bank facilities to be extended to the company. With the proposed recapitalisation, SMM said it expects banks to refinance existing borrowings and provide additional facilities. However, should the transaction fall through, banks are expected to refinance existing borrowings without providing additional financing.

SMM also addressed market chatter on a potential merger with industry conglomerate Keppel or a privatisation, saying it was not aware of any such proposals.

Although SCI has not been bogged down by financial losses, it remains focused on unlocking value for shareholders through this transaction. It said the demerger would transform the company into a “focused energy and urban business” and allow it to allocate capital and resources solely to these businesses.

Both SCI and SMM said they were unable to comment on the share price of the companies after the transaction.

Both companies are set to convene their virtual EGMs on Aug 11. The SMM meeting will be held at 10am, while the SCI meeting will take place at 11.30am.

Shareholders may participate in the EGMs by observing and/or listening to the proceedings via live audio-visual webcast or live audio-only stream, and by submitting questions in advance. Due to the Covid-19 pandemic, shareholders will not be allowed to attend the EGMs in person.

SMM shareholders who wish to register for the EGM and submit questions or proxy forms must do so by Aug 8, 10am, while the deadline for SCI shareholders is Aug 8, 11.30am. (see amendment note)

SCI shares closed at S$1.83 on Wednesday, up S$0.13 or 7.7 per cent, while SMM shares closed at 38.5 Singapore cents, up 4.5 cents or 13.2 per cent.

Amendment note: An earlier version of the article incorrectly stated that the deadline for SCI and SMM shareholders to register for the EGM and submit questions or proxy forms was 10am and 11.30am respectively. The article has been amended to reflect this change. 

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