Keppel inks revised deal on merger of its O&M division with Sembcorp Marine

The revised deal will accelerate the completion of the merger.

Some terms to the merger of Keppel Corporation’s (Keppel) offshore and marine (O&M) division with Sembcrop Marine have been revised to accelerate the completion of the transaction.

In a bourse filing, Keppel said changes in certain commercial terms and transactions structure in the deal would also “simplify implementation and provide greater deal certainty.”

Under the revised deal, the exchange ratio between Keppel and Sembcorp Marine has been changed from 56:44 to 54:46 respectively. 

“As a result, the value of the equity shares in Sembcorp Marine that Keppel would receive from the proposed transaction would be lowered by about $378million, from approximately S$4.87 billion to approximately $4.50b,” Keppel explained.

The revised deal also reduced the amount to be retained in the segregated account for certain identified contingent liabilities from 10% to 5%. 

“As a result, Keppel will distribute in-specie 49% of the Sembcorp Marine shares to Keppel’s shareholders, instead of the earlier 46%. Consequently, shareholders of Keppel will receive approximately 19.1 Sembcorp Marine shares with an implied value of S$2.331, 2 for every Keppel share held,” Keppel said.

“This will be higher than the earlier indicated amount of 18.5 separate Combined Entity shares with an implied value of S$2.263 for every Keppel share held,” it added.

Overall, the revised agreement will eliminate the requirement for a separate Combined Entity to be interposed as the listed entity holding both Keppel O&M and Sembcorp Marine.

This is because the proposed combination will be restructured into an acquisition of Keppel O&M, excluding its interests in certain out-of-scope assets and the legacy rigs and their associated receivables, by Sembcorp Marine. 

“Sembcorp Marine will therefore become the Combined Entity owning, post-acquisition, a combination of its current business and Keppel O&M,” Keppel said.

“Consequently, the simplified structure would only require majority approval by Keppel shareholders and Sembcorp Marine shareholders. Court approval will no longer be required. Transfer of listing status from Sembcorp Marine to a separate Combined Entity will also no longer be required,” the company added.

Both companies are targeting to complete the proposed combination by the end of 2022.