June 25, 2021

Keppel jumps, Sembcorp Marine tumbles as trading resumes after news of O&M merger talks

By ellen

SINGAPORE – The share prices of Keppel Corp and Sembcorp Marine (Sembmarine) went in different directions when trading in the stocks resumed on Friday morning (June 25), after the two announced talks to explore a potential combination of their offshore and marine (O&M) businesses.

Keppel shares jumped 29 cents or 5.4 per cent to $5.40 at 9.04am, from their close on Wednesday, while Sembmarine fell 4.6 cents or 24 per cent to 14.5 cents. The companies had halted trading on Thursday.

At 9.40am, Keppel extended its gains, trading up 6.3 per cent at $5.43. Sembmarine, the most heavily traded stock by volume, was down 18.9 per cent at 1.55 cents, with 319,000 shares trading hands.

The two companies on Thursday signed a non-binding agreement to enter into exclusive talks with the aim of merging Keppel’s offshore and marine arm (Keppel O&M) and Sembmarine. This is intended to create a combined entity that is better positioned to compete for contracts in offshore renewable energy.

The move comes amid an extended period of low oil prices and persistent disruptions in the oil and gas sector, such as manpower shortages and reductions in demand for rigs by oil majors.

If a merger ensues, Keppel says it expects to receive shares in the combined entity, which will remain listed on the Singapore Exchange. Keppel intends to distribute all these shares to its shareholders. It will also receive cash totalling $500 million.

Meanwhile, in a move expected to immediately depress Sembmarine’s shares from the dilution effect, the company separately announced on Thursday it will seek fresh funds via a fully underwritten $1.5 billion renounceable rights issue. In September last year, Sembmarine raised $2.1 billion in a similar exercise following its demerger from Sembcorp Industries.