WE have noted increased commentary on the proposed combination of Keppel Offshore & Marine and Sembcorp Marine : S51 0%(Sembmarine), and the letter by Sembcorp Industries : U96 0% (Sembcorp) to The Business Times on Aug 25, 2022 explaining the context behind the demerger of Sembcorp and SembMarine in 2020.

These highlight important issues for all shareholders to consider as they prepare to vote on the proposed combination at the respective extraordinary general meetings (EGMs) of Keppel Corporation : BN4 0% and SembMarine, expected to take place in the fourth quarter of 2022. As a major shareholder in both Keppel and SembMarine, we think it would also be useful to share our perspectives with fellow shareholders.

Temasek became a direct shareholder of SembMarine in 2020 following the demerger of SembMarine from its then-parent, Sembcorp. Along with the demerger, SembMarine carried out a S$2.1 billion rights issue to repay a loan of S$1.5 billion advanced by Sembcorp to SembMarine, and to strengthen its cash position and balance sheet. Temasek took up the rights shares not subscribed by other SembMarine shareholders and received its pro-rata entitlement during Sembcorp’s distribution of SembMarine shares to its shareholders thereafter (based on our 49.3 per cent shareholding in Sembcorp). The demerger and the 2020 rights issue resulted in Temasek acquiring a 42.6 per cent shareholding in SembMarine. The financial outlay by Temasek in the 2020 rights issue was S$206 million.

In 2021, amid the Covid-19 pandemic, SembMarine urgently needed to recapitalise to address business requirements and complete existing projects. The board of SembMarine called for a S$1.5 billion rights issue to strengthen the company’s balance sheet, and continue its progress on its transformation journey, which included a memorandum of understanding for the proposed combination. Temasek participated in the rights issue based on commercial considerations. We voted in favour of the rights issue and agreed to subscribe for not only our pro-rata entitlements based on our 42.6 per cent shareholding in SembMarine, but also any excess rights not taken up by other shareholders, up to 67 per cent of the 2021 rights issue. The commitment, provided without the benefit of a whitewash waiver resolution, gave SembMarine certainty that it could raise the full S$1.5 billion that it needed. This resulted in Temasek having to make a mandatory general offer, at the rights issue price. Shareholders tendered an additional 8 per cent of SembMarine shares. The financial outlay by Temasek in the 2021 rights issue and mandatory general offer was S$942 million.

Since becoming a direct shareholder of SembMarine in 2020 through the demerger of Sembcorp and SembMarine, Temasek has made a significant investment of approximately S$1.1 billion in SembMarine through the 2020 rights issue, 2021 rights issue and mandatory general offer, resulting in an ownership of 54.6 per cent in the company.

This year, Keppel and SembMarine announced the proposed combination. Both companies have clearly articulated the benefits of the merger. As a major shareholder in both companies, we fully support the rationale for the transaction and share the belief that all shareholders will benefit from being part of the combined entity.

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We expect the combined entity to be well-positioned to achieve the necessary scale and synergies to become more competitive and to build a sustainable orderbook amid the changing global energy environment. This is also well aligned with our objective to catalyse the transition of our portfolio companies towards a net zero world.

With substantial value at stake through our shareholding in SembMarine, Temasek is fully aligned with fellow shareholders in seeking the best outcome for the company. We support the SembMarine board’s expressed view that the proposed combination offers the best and most compelling way forward for SembMarine to unlock long term value for all of its stakeholders.

As a major shareholder of both Keppel and SembMarine, Temasek will abstain from voting on all resolutions relating to the proposed combination in the upcoming EGMs. The decision will therefore rest solely in the hands of the independent shareholders of both companies, who have to carefully consider the facts around the transaction. We hope our perspectives shared will be beneficial to fellow shareholders as they prepare to vote on the proposed combination.

Nagi Hamiyeh, head, portfolio development group, Temasek