SINGAPORE: State investor Temasek Holdings on Monday (Oct 21) offered to buy control of Keppel Corp in a S$4.1 billion deal that could hasten a consolidation in the rig building sector, which is battling the effects of low oil prices.
Temasek already owns 20.5 per cent of Keppel and said it would increase its stake to 51 per cent, subject to domestic and foreign regulator approvals which could take many months.
"The partial offer reflects our view that there is inherent long term value in Keppel's businesses, notwithstanding the challenges presented by the current business and economic outlook," Temasek International's president Tan Chong Lee said in the statement.
If the deal is closed, Temasek will seek to work with Keppel's board to undertake a strategic review of its businesses.
Temasek said it does not plan to delist or privatise Keppel, which would remain listed on Singapore Exchange.
An indirect fully owned subsidiary of Temasek will offer S$7.35 in cash for each Keppel share, a premium of nearly 26 per cent over the last traded price of S$5.84.
Shares in Keppel were halted for trading earlier on Monday. Morgan Stanley is the sole financier adviser to Temasek for the offer.
Keppel is involved in rig-building, property development, infrastructure and investments.
Keppel's offshore and marine unit, and Sembcorp Marine, the two local players, have been hit by a prolonged downturn in the global sector in the last five years as oil prices tumbled.
"There has long been talk of a potential restructuring of businesses under the Keppel Corp and Sembcorp Industries stable such as the merging of the offshore & marine yards," said Low Pei Han, senior research analyst at Bank of Singapore.
Both Keppel and Sembcorp Marine were among a host of firms caught up in Brazil's wide-ranging "Car Wash" corruption probe. In late 2017, Keppel's rig-building unit paid US$422 million to resolve charges it paid bribes to secure contracts in Brazil, including with indebted Brazilian firm Sete Brasil.
Keppel and Sembcorp Marine said earlier this month they had reached settlements with Sete Brasil over longstanding contracts to build drillships and rigs.
"It's a good time for them to increase their stake, get it past 50 per cent. But then it's not going to be a straightforward partial offer because of the regulatory requirements," said Justin Tang, head of Asian research at United First Partners.