Temasek proposes $4b deal to take over Keppel Corporation
Analysts say move could pave way for consolidation in offshore, marine industry
With overcapacity in the global shipyard business, analysts said yesterday Temasek Holdings' proposed $4.08 billion deal to take control of Keppel Corporation could pave the way for consolidation in Singapore's offshore and marine industry.
"Competition is only expected to increase as Chinese and South Korean shipyards continue to consolidate, thus creating industry heavyweights with a significantly larger footprint," said KGI Securities Singapore research head Joel Ng.
OCBC Investment Research head Carmen Lee said Temasek's move sets in motion a series of potential transactions, and noted the offer document states that creating sustainable value through such actions may take several years.
"Overall, we view this as a positive development as Temasek is taking a proactive approach in reviewing its portfolio and investments for the longer term," she said.
Keppel asked for a trading halt yesterday morning before the announcement.
The events led Sembcorp Marine shares to jump to a high of $1.36, a 13 per cent rise over the previous close, prompting the Singapore Exchange (SGX) to query the "unusual price movements". The price closed slightly lower.
The company said it was not aware of any possible explanation "save for possible market speculation" arising from the announcement of the potential offer for Keppel's shares.
SAC Capital senior research analyst Terence Chua said a likely factor is the market viewing a possible merger between Keppel Offshore and Marine and Sembcorp Marine, which was considered in 2001.
Such a merger, he added, "would create a strong rigbuilding giant to compete more effectively on a global scale".
JUMP IN REVENUE
Keppel last week announced third-quarter net profit of $159 million, down 30 per cent from a restated $227 million a year ago, though its offshore and marine business posted a 52 per cent jump in revenue to $632 million.
Temasek yesterday announced its wholly-owned subsidiary Kyanite Investment Holdings will make a partial offer to acquire 30.55 per cent, or 554.9 million, of Keppel shares at $7.35 per share in cash.
With Temasek owning directly 20.45 per cent of Keppel, the move, if successful, will raise its stake to 51 per cent.
It said the offer price is at a premium of about 26 per cent over the last traded price of $5.84 on Friday, and about 21 per cent above the three-month volume weighted average price of $6.07.
The offer will be made only if pre-conditions are satisfied or waived by Oct 21 next year, or a later date.
The offer has to be approved by shareholders - excluding Kyanite, Temasek and their associates - and at least 30.55 per cent of shares must be tendered into the offer for it to be successful.
Temasek International president and Kyanite director Tan Chong Lee, said: "The partial offer reflects our view that there is inherent long-term value in Keppel's businesess, notwithstanding the challenges presented by the current business and economic outlook."