Keppel has entered into definitive agreements with Sembcorp Marine for the proposed combination of Keppel Offshore & Marine and Sembcorp Marine.
Under the terms of the agreement, the companies will receive equity shares representing a 56% equity interest in the combined entity (which will be listed as a separate listed entity) as well as $500 million in cash. This values Keppel O&M, on a pro forma basis, at approximately $4.87 billion, excluding the extraction of the $500 million cash, its interests in certain out-of-scope assets with a book value of approximately $300 million as of 31 December 2021, which will be retained by Keppel Corporation, as well as the legacy rigs and their associated receivables which will be sold to Asset Co.
Asset Co, which will be independently managed from the Combined Entity and Keppel, will maintain, complete and monetize the rigs over time for repayment of the vendor notes and perpetual securities. Asset Co will also enter into a master services agreement with the Combined Entity, through Keppel O&M, for the completion of certain uncompleted rigs and the provision of other services. The external investors of Asset Co will provide capital for completing uncompleted rigs, which would no longer be funded by Keppel.
The two proposed transactions, which are inter-conditional and being executed concurrently, will be subject to relevant regulatory and shareholder approvals, which are expected to be completed by the end of 2022.
“The proposed combination brings together two leading O&M companies in Singapore to create a premier player that is well positioned to address the challenges and opportunities in the evolving offshore and marine sector and the energy transition,” said Loh Chin Hua, CEO of Keppel. ““At the same time, the external investors in the Asset Co transaction will provide capital that can be used for finishing uncompleted legacy rigs, which will no longer be funded by Keppel. With improving conditions in the offshore & marine sector, underpinned by the improving oil price and increasing utilization and dayrates of offshore drilling rigs, we are confident that Keppel O&M’s legacy rigs can be substantially monetized in the next 3-5 years.”