Singapore shipbuilders Keppel Corporation and Sembcorp Marine have entered into a non-binding memorandum of understanding (MOU) to enter into exclusive negotiations with a view to combining Keppel Offshore and Marine (Keppel O&M) and Sembcorp Marine into a single entity.
The two companies said the objective of the discussions is to create a stronger Combined Entity and sustainable value over the long term for Keppel O&M and Sembcorp Marine and their respective stakeholders, in response to changes in the global offshore and marine (O&M) engineering and energy sectors.
Both Keppel and Sembcorp said the combined entity will be better placed to compete for larger contracts.
Concurrent with the MOU on the potential combination, Keppel has also signed a non-binding MOU with Kyanite Investment Holdings, a wholly owned subsidiary of Temasek, for Keppel O&M's legacy rigs and associated receivables to be sold to a separate asset company that would be majority owned by external investors.
The two proposed transactions will be inter-conditional and pursued concurrently.
Under the MOU between Keppel and Sembcorp Marine, it is envisaged that Keppel and the combined entity will enter into a strategic partnership, pursuant to which Keppel will hold 50 per cent of a 50-50 joint venture that will be established between Keppel and the combined entity. This would allow Keppel to continue accessing Keppel O&M's capabilities required for its projects, on terms to be agreed.
The scope of the strategic partnership joint venture will be subject to final agreement between the parties concerned.
In addition, subject to regulatory review, the combined entity will be the preferred EPC partner for Keppel's projects where the combined entity has the relevant expertise.
The two companies expect several months will pass before the merger is finalised.
