Keppel, Sembcorp Marine in Talks to Combine Offshore and Marine Businesses

By Ben Otto

Singapore conglomerate Keppel Corp. and rig-builder Sembcorp Marine Ltd. have begun talks to potentially combine their struggling offshore and marine businesses.

The Singapore-listed companies said Thursday that they signed a nonbinding memorandum of understanding to consider combining Keppel Offshore & Marine, a Keppel subsidiary, with Sembcorp Marine. Sembcorp Marine said it expected talks and due diligence to take several months.

The companies said a combined entity would be better positioned to compete and would accelerate their pivots toward offshore and marine renewables opportunities.

If the deal goes through, Keppel could receive shares in the new entity that it would distribute to shareholders, as well as a cash consideration of up to 500 million Singapore dollars (US$371.5 million), Keppel said. The combined entity would be listed, it added.

The companies also envision creating a 50-50 joint venture between Keppel and the combined entity, allowing Keppel to continue accessing Keppel Offshore & Marine's capabilities for its projects, the conglomerate said.

"The proposed combination would create a stronger player that can compete more effectively," said Loh Chin Hua, Keppel's chief executive.

Separately, Sembcorp Marine said it plans to raise up to S$1.5 billion in a rights issue to strengthen its balance sheet, and in response to disruptions from the Covid-19 pandemic. Proceeds would go toward working capital and other general corporate needs, including debt servicing.

Like many of their peers, Keppel and Sembcorp Marine have been severely affected by the pandemic, which drove oil prices to record lows, hitting drilling and exploration activities world-wide.

Keppel's shares are down about 15% over the past 12 months, while Sembcorp Marine has slid more than 38% over the same period.

Write to Ben Otto at [e-mail]

Corrections & Amplifications

This item was corrected on June 25, 2021 to reflect the potential structure of a combined entity and related joint venture currently under discussion. The original version incorrectly described the transaction.

(END) Dow Jones Newswires

06-24-21 0631ET