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MarketScreener Homepage  >  Equities  >  SINGAPORE EXCHANGE  >  Keppel Corporation Limited    KPLM   SG1U68934629

KEPPEL CORPORATION LIMITED

(KPLM)
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Temasek makes $3 billion bid for Singapore's Keppel, sparks sector M&A talk

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10/21/2019 | 11:01pm EST
A view of Keppel building in Singapore

SINGAPORE (Reuters) - Temasek Holdings is offering to buy control of Singapore conglomerate Keppel Corp in a S$4.1 billion ($3 billion) deal that could spark consolidation in the domestic rig building sector that is battling the effects of low oil prices.

The announcement, which confirmed what sources told Reuters earlier on Monday, boosted shares in rig builder Sembcorp Marine by 12% on expectations of a likely shake-up in the industry.

On Tuesday, the shares rose a further 2.2%, while shares in Sembcorp's parent Sembcorp Industries were steady after rallying 10% in the previous session.

Keppel's offshore and marine unit, and Sembcorp Marine, the two local players, have been hit by a prolonged downturn in the global sector in the last five years as oil prices tumbled.

"There has long been talk of a potential restructuring of businesses under the Keppel Corp and Sembcorp Industries stable such as the merging of the offshore & marine yards," said Low Pei Han, senior research analyst at Bank of Singapore.

Singapore state investor Temasek [TEM.UL] said if the deal is completed, it would seek to work with Keppel's board to undertake a strategic review of its businesses. The deal is Temasek's biggest since a $3.7 billion minority stake investment it made in German drugmaker Bayer in April 2018.

Temasek already owns 20.5% of Keppel and said it would increase its stake to 51%, subject to domestic and foreign regulator approvals which could take several months.

An indirect fully owned subsidiary of Temasek will offer S$7.35 in cash for each Keppel share, a premium of nearly 26% over Friday's S$5.84 close. Trading was halted on Monday.

Keppel's shares soared 15.7% to S$6.77 on Tuesday but still traded below Temasek's offer price of S$7.35. Before news of the offer, they had been languishing just above a three-year low struck in late August.

Temasek's deal comes amid consolidation in South Korea's and China's shipbuilding and marine sector in the last few years. Temasek also owns nearly half of Sembcorp Industries.

COMPLEX DEAL

"The partial offer reflects our view that there is inherent long-term value in Keppel's businesses, notwithstanding the challenges presented by the current business and economic outlook," Tan Chong Lee, president of Temasek's investment arm, said in the statement.

Keppel is involved in rig-building, property development, infrastructure and investments.

Both Keppel and Sembcorp Marine were among a host of firms caught up in Brazil's wide-ranging "Car Wash" corruption probe. In late 2017, Keppel's rig-building unit paid $422 million to resolve charges it paid bribes to secure contracts in Brazil, including with indebted Brazilian firm Sete Brasil.

Keppel and Sembcorp Marine said earlier this month they had reached settlements with Sete Brasil over longstanding contracts to build drillships and rigs.

Temasek does not plan to delist Keppel, which would remain listed on Singapore Exchange.

"It's a good time for them to increase their stake, get it past 50%. But then it's not going to be a straightforward partial offer because of the regulatory requirements," said Justin Tang, head of Asian research at United First Partners.

Morgan Stanley is the sole financier adviser to Temasek for the offer.

(Reporting by Anshuman Daga in Singapore; Additional reporting by Fathin Ungku; Editing by Christopher Cushing, David Holmes and Muralikumar Anantharaman)

By Anshuman Daga

Stocks mentioned in the article
ChangeLast1st jan.
BAYER AG -0.67% 69.84 Delayed Quote.16.25%
KEPPEL CORPORATION LIMITED 0.58% 6.9 End-of-day quote.16.36%
SEMBCORP INDUSTRIES LTD 0.88% 2.29 End-of-day quote.-10.20%
SEMBCORP MARINE LTD 0.75% 1.34 End-of-day quote.-13.55%
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Financials (SGD)
Sales 2019 7 118 M
EBIT 2019 864 M
Net income 2019 831 M
Debt 2019 7 653 M
Yield 2019 3,14%
P/E ratio 2019 14,9x
P/E ratio 2020 12,8x
EV / Sales2019 2,84x
EV / Sales2020 2,53x
Capitalization 12 533 M
Technical analysis trends KEPPEL CORPORATION LIMITED
Short TermMid-TermLong Term
TrendsBullishBullishNeutral
Income Statement Evolution
Consensus
Sell
Buy
Mean consensus BUY
Number of Analysts 17
Average target price 7,50  SGD
Last Close Price 6,90  SGD
Spread / Highest target 21,2%
Spread / Average Target 8,69%
Spread / Lowest Target -13,0%
EPS Revisions
Managers
NameTitle
Chin Hua Loh Chief Executive Officer & Executive Director
Boon Yang Lee Non-Executive Chairman
Hon Chew Chan Chief Financial Officer
Jacob Tong General Manager-Group Information Systems
Khirn Hai Yeo Independent Non-Executive Director
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