Keppel Corp and Sembcorp Marine unveiled details of the proposed merger of their offshore and marine activities on Wednesday, a year after first announcing they were in talks.
The proposed combination involves the establishment of a new holding company, which will combine the businesses of Keppel Offshore & Marine and Sembcorp Marine via separate schemes of arrangement.
The composition of the board of directors and senior management of the new company will be disclosed at a later date.
The combined entity will adopt a new name and brand identity to “reflect its focus on offshore renewables, new energy and cleaner solutions in the O&M [offshore and marine] sector”.
Once the merger is completed, Keppel Corp will own 56% of the combined entity, while Sembcorp Marine’s shareholders will own the remaining shares.
Keppel Corp said it plans to distribute in-specie 46% of the merged entity’s shares to its shareholders and retain a 10% stake.
Singapore sovereign wealth fund Temasek Holdings will become the largest shareholder in the combined company with a 33.5% stake.
Keppel Offshore & Marine’s legacy rigs and associated receivables will not be part of the proposed combination and will be sold to a separate Asset Co that will be 90%-owned by other investors, with Keppel Corp holding a 10% stake.
“The combined entity will be well-positioned to capture opportunities arising from decarbonisation in the oil & gas sector and from the global energy transition towards renewables, particularly in the areas of offshore wind, and new energy sources such as hydrogen and ammonia,” the companies said in a joint statement.
The offshore and marine sector has faced a prolonged and severe downturn since 2015, exacerbated by the rapid global transition towards renewables and clean energy, as well as significant disruptions during the Covid-19 pandemic.
Amid this downturn, competition for a shrinking pool of projects has intensified, contributing to an increased level of debt across the industry and necessary equity issuances to strengthen financial positions.
Additionally, many offshore players have sought consolidation to achieve the scale and synergies needed to become more competitive and build a sustainable orderbook.
“Oil prices have rallied in recent months, and conditions in the O&M sector are improving. However, the long-term outlook for the sector is shifting amid the energy transition,” the two companies said.
“Growing commitments by governments and companies around the world seeking to achieve net-zero carbon emissions are driving increasing demand for renewable and clean energy solutions.
“These include areas such as offshore wind, hydrogen and ammonia, in which both Keppel O&M and Sembcorp Marine have built their respective capabilities and track records in the past few years.”
Keppel Corp chief executive Loh Chin Hua described the signing of the agreement as a “strategic milestone” for the offshore and marine sector.
“It brings together two leading O&M companies in Singapore to create a stronger player that can realise synergies and compete more effectively amidst the energy transition,” he added.
JPMorgan acted as the financial advisor to Keppel Corp on the deal, while Swiss bank Credit Suisse advised Sembcorp Marine.
The proposed combination is subject to various regulatory approvals and is expected to be put to respective shareholders for approval in the fourth quarter of 2022.
