Sembmarine doubles down on merger narrative after minority shareholder revolt

SEMBCORP Marine : S51 0% (Sembmarine) has issued a response to further shareholder queries where it once again reiterated the rationale and benefits of its proposed merger with Keppel Offshore and Marine (Keppel O&M).

This comes ahead of a Jun 20 virtual dialogue session organised by the Securities Investors Association (Singapore) which is slated to be held at 5 pm, and after a minority shareholder known as Philip Loh launched an online campaign against the proposed deal.

Through his website (http://www.votenoformerger.com), Loh dubbed the deal as “highly disadvantageous” to Sembmarine’s minority shareholders, claiming terms of the deal to be unfair.

In a recent post he also posited that Sembmarine’s share price is set to be driven “substantially higher” should the company believe minority shareholders will turn up in force to vote against the deal, as interested parties will have to buy up their shares to ensure the deal goes through.

Without the merger, Sembmarine said it will, as a standalone entity, have to navigate an “even more competitive landscape” – where it noted offshore players have sought consolidation or were otherwise “challenged by the radically-changed fundamentals” of the business and needs of customers.

Highlighting increased agility, technical strength and operational efficiencies of a combined entity, the group intends to offer offshore renewables, new energy and cleaner solutions in the O&M sector with the resultant “premier global player” it envisions.

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The proposed combination also offers the best way forward for Sembmarine to play a long-term role in meeting the changing needs of its O&M customers who themselves require new, cleaner energy solutions, said the company in a filing on Monday (Jun 20) before the market opened.

“The combination with a restructured Keppel O&M allows Sembmarine to immediately step up in terms of scale, capabilities and operational reach to tap into opportunities and better compete on the global stage in the new energy era,” added the group. 

Based on illustrative FY2021 pro-forma metrics provided by the group in its Jun 20 statement, the combined entity would result in a combined net loss of S$1.3 billion, but narrower loss per share (LPS) of S$0.022 compared to Sembmarine’s FY2021 LPS of S$0.065.

Net tangible assets (NTA) per share of the combined entity would be S$0.07, as opposed to Sembmarine’s NTA per share of S$0.12 for the financial year.

Gearing of the combined entity will be lower at 22 per cent on a pro forma basis, compared to 33 per cent for Sembmarine on a standalone basis.

The deal will be based on a 50:50 enterprise value ratio which reflects the equal enterprise values of the 2 companies, before taking into account their respective capital structures.

Keppel will own 56 per cent of the combined entity, while Sembmarine shareholders will own 44 per cent. Keppel will then distribute in-specie 46 per cent of the combined entity shares to its shareholders and retain a 10 per cent stake, which will be placed in a segregated account.

The illustrative NTA of the restructured Keppel O&M that is attributable to each Keppel share is about S$0.47 for FY2021.

Sembmarine closed S$0.004 or 3.7 per cent lower at S$0.105 on Monday.