Keppel Corporation announced that it has entered into definitive agreements with Sembcorp Marine for the proposed merger of Keppel Offshore & Marine (O&M) and Sembcorp Marine. The proposed merger is based on a 50-50 enterprise value ratio between Keppel O&M and Sembcorp Marine. As per the merger, Keppel will hold a 56% equity stake in the combined entity which will be separately listed, and cash of S$500mn ($362mn) while Sembcorp Marine shareholders will own 44%. The transaction will allow Keppel to realize ~S$9.42bn ($6.84bn) in value. This comprises of Keppel O&M valued at S$4.87bn ($3.53bn), extraction of S$500mn ($362mn) in cash as part of Keppel O&M’s pre-combination restructuring and S$4.05bn ($2.9bn) which includes vendor notes, perps and a 10% stake in Asset Co from the sale of Keppel O&M’s legacy rigs and associated receivables to Asset Co. 46% of equity shares in the combined entity will be distributed to Keppel’s shareholders and Keppel will deposit the remaining 10% into a segregated account for certain contingent liabilities. Post-transaction, Temasek will become the largest shareholder of the combined entity with a 33.5% stake. The deal will be subject to regulatory and shareholder approvals and expected to be completed by end of 2022. On a pro forma basis had the proposed transactions been completed on January 1 2021, the EPS for FY 2021 would have increased from S$0.56 to S$0.725, excluding the net disposal gain.

Keppel Corp’s SGD bonds were trading slightly higher, its 2.25% 2025s was up 0.02 points to 97.61 yielding 3.10%.

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