Sembmarine and SCI to demerge following $2.1b rights issue

Both firms will solely focus on their respective industries following the transaction.

Sembcorp Industries (SCI) and Sembcorp Marine (Sembmarine) aim to recapitalise the latter through a $2.1b renounceable rights issue, the companies announced in a press release. This will then result in demerger between the two firms via a distribution in specie of SCI’s stake in the recapitalised Sembmarine to SCI shareholders.

Upon completion of the proposed transaction, SCI intends to focus on its core areas of energy and urban development, whilst Sembmarine said that it will build on its core engineering solutions for the offshore, marine and energy industries.

“Sembcorp Marine, which has been doubly hit by the COVID-19 pandemic and recent collapse in oil prices, will also be able to better address its urgent need to recapitalise, meet liquidity requirements, and strengthen its balance sheet to ride through the prolonged downturn in the offshore and marine industry,” both firms said.

SCI and Sembmarine will be seeking their respective shareholders’ approval for the transaction at its extraordinary general meetings (EGMs) on around end-August or early-September. The rights issue is also conditional on Sembcorp Marine shareholders passing a resolution to waive their rights to receive a general offer from Temasek and its concert parties in connection with the proposed distribution. SCI has irrevocably undertaken to subscribe for its pro rata entitlement of $1.27b and take up an additional $230m if necessary, for a total commitment of up to $1.5b.

SCI’ shareholders will also receive between 427 and 491 Sembcorp Marine shares for every 100 of its shares owned, with no cash outlay, depending on the total number of Sembmarine shares held after the rights issue.

After the rights issue, Temasek will be a direct shareholder of both SCI (about 49.3%) and Sembmarine (stake exceeding 29%). It also agreed to sub-underwrite the remaining $0.6b of the rights issue with no sub-underwriting fees.

DBS Bank is appointed as the sole financial adviser to SCI and is also the sole financial adviser, lead manager and underwriter for Sembmarine. Credit Suisse (Singapore) is also the sole financial adviser to Temasek.