Singapore's Temasek Makes Takeover Offer for Offshore Rig Builder Keppel
October 22 2019 - 2:29PM
Dow Jones News
By Costas Paris
Singapore's Temasek Holdings made a $2.9 billion offer for
majority control of Keppel Corp., and the sovereign-wealth fund
plans to merge the shipyard with rival Sembcorp Marine Ltd. in
response to consolidation in the ship construction sector in South
Korea and China, people familiar with the matter said.
The move would mark the biggest action in the maritime business
for Temasek, which has a $230 billion portfolio that includes
shipping, airlines, real estate, energy and bank investments, since
it sold Singapore flag carrier Neptune Orient Lines to French
operator CMA CGM SA for $2.4 billion in 2015.
Keppel and Sembcorp Marine both specialize in building offshore
rigs. That business has foundered in recent years as a surge in
shale oil production in the U.S. has made it difficult for offshore
oil explorers to compete.
Temasek already owns nearly 21% of Keppel, which also counts
private-equity groups BlackRock Inc. and Vanguard Group as
investors. The offer made Monday at 7.35 Singapore dollars ($5.40)
a share is a 26% premium to Keppel's S$5.84 closing price last
Friday and would boost Temasek's holding to 51%.
"Offshore drilling is looking up, but it needs investment," said
a person involved in the matter, who asked not to be named because
they weren't authorized to talk to the media. "There are no
decisions yet, but the plan is to look into a merger with Sembcorp
Marine following extensive yard consolidation in China and Korea.
But if it doesn't work, Sembcorp Marine may be privatized."
Other options may be examined aside from privatization, another
person said.
Temasek owns 49.5% of Sembcorp Industries Ltd., a global
business including logistics warehouses, infrastructure, energy
generation and utilities whose holdings include Sembcorp
Marine.
Sembcorp Marine's market value before the offer stood at around
$2.1 billion and Keppel's at $7.9 billion.
"The partial offer reflects our view that there's inherent
long-term value in Keppel's businesses, notwithstanding the
challenges presented by the current business and economic outlook,"
Tan Chong Lee, president of Temasek International, said in a
statement.
Temasek said it made the offer through its wholly owned
subsidiary Kyanite Investment Holdings, which will undertake a
comprehensive review of Keppel's businesses and balance sheet.
Keppel last week reported third-quarter net profit of $110.7
million, a 30% decline from the same period last year.
Temasek's move comes after Keppel and Sembcorp Marine reached
long-awaited settlements with Brazilian offshore driller Sete
Brasil in early October over a combined 13 rigs under construction
worth billions of dollars. Sete stopped making payments on the rigs
in November 2014 and filed for bankruptcy protection in 2016.
"Now the path is clear, we will look to make Keppel one of
Singapore's best performers again," the second person close to the
matter said. "If we are to compete in shipbuilding, we have to take
the giants in Korea and China head on."
China and South Korea, the world's two biggest shipbuilders,
both are in the process of merging their biggest yards. The
combination of China State Shipbuilding Corp. and China
Shipbuilding Industry Corp. will create a single entity with more
than $110 billion in assets, and South Korea's Hyundai Heavy
Industries Co. would have more than $30 billion in assets after its
takeover of Daewoo Shipbuilding & Marine Engineering Co.
Write to Costas Paris at costas.paris@wsj.com
(END) Dow Jones Newswires
October 22, 2019 14:14 ET (18:14 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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