Keppel Corporation Ltd. has entered into a definitive agreement to merge its Keppel Offshore & Marine (O&M) unit with rival Sembcorp Marine, creating one of the largest offshore rig and production facilities builders in the world with a value of S$9.42 billion ($6.8 billion). The proposed combination follows the signing of a memorandum of understanding between Keppel and Sembcorp Marine on 24 June 2021.
Both companies are controlled by Singapore-based global investment firm Temasek. Upon completion of the transaction, Keppel will own 56% of the combined entity, while Sembcorp will own 44%. Temasek will hold a 33.5% stake in the combined company. Temasek will abstain from voting on the deal. As part of the agreement, Keppel O&M will divest its legacy oil rigs business into a separate entity that will be owned by investors including Keppel Corp. and a unit of Temasek.
“The signing of a win-win agreement on the proposed combination of Keppel O&M and Sembcorp Marine marks a strategic milestone for the offshore & marine sector,” said Loh Chin Hua, chief executive of Keppel and chairman of Keppel O&M. “It brings together two leading O&M companies in Singapore to create a stronger player that can realize synergies and compete more effectively amidst the energy transition. Together with the resolution of Keppel O&M’s legacy rigs, this is a major step forward in Keppel’s Vision 2030 journey, as we simplify our business and sharpen our focus on providing solutions for sustainable urbanization.”
The O&M sector has faced a severe downturn since 2015, exacerbated by the rapid global transition toward renewables and clean energy, as well as significant disruptions during the COVID-19 pandemic. Amid this downturn, competition has increased for a shrinking pool of projects, leading to increased debt across the industry and equity issuances to strengthen financial positions. The companies suffered a combined net loss of S$1.3 billion ($942 million) in 2021.
The combined entity will adopt a new name and brand identity to reflect its focus on offshore renewables, new energy, and cleaner solutions in the O&M sector.
