Keppel, Sembcorp start talks on possible merger

Keppel is also in talks with Temasek on selling its legacy rigs.

Keppel Corporation Limited has signed a non-binding Memorandum of Understanding (MOU) with Sembcorp Marine Ltd. to enter into exclusive negotiations with a view to combining Keppel Offshore & Marine (Keppel O&M) and Sembcorp Marine.

In  a joint statement, the two companies said that the objective of these discussions is to create a stronger combined entity and sustainable value over the long term for Keppel O&M and Sembcorp Marine and their respective stakeholders, in response to dramatic changes in the global offshore and marine engineering and energy sectors.

“In recent years, there has been a sustained reduction in oil exploration and development activities, which caused a significant reduction in business for the O&M sector. The prolonged downturn has been exacerbated by the impact of COVID-19, the fall in oil demand and prices in 2020, and the global energy transition away from oil. In response, several global peers of Keppel O&M and Sembcorp Marine have pursued consolidations to create scale, retain talent, and more effectively use their asset bases. In particular, such actions aim to position these peers for new opportunities arising from the energy transition,” they said.

If the merger pushes through, the combined companies of Keppel and Sembcorp will be a listed entity and Keppel will receive shares in the Combined Entity and a cash consideration of up to $500m. 

Keppel said it intends to distribute to its shareholders all the shares that it receives from the merger.

Additionally, Keppel has also signed a non-binding MOU with Kyanite Investment Holdings Pte Ltd (Kyanite), a wholly owned subsidiary of Temasek, with a view to sell Keppel O&M’s legacy rigs completed and uncompleted rigs and associated receivables to a separate Asset Co, which would be majority owned by external investors which will be omitted from the merger with Sembcorp.

Keppel and Sembcorp said that they will provide updates in due course and stressed that discussions are at a preliminary stage and there is no certainty that the potential combination will take place.