Onshore/Offshore Facilities

Keppel O&M, Sembcorp To Combine in Marine Fabrication Mega-Merger

The combined company will get a new name and a new focus on offshore renewables and other clean energy projects.

The hull of the Vito floating production unit at Sembcorp’s Tuas Boulevard Yard in Singapore.
The hull of the Vito floating production unit at Sembcorp’s Tuas Boulevard Yard in Singapore last year.
Source: Shell.

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.