August 29, 2022. SINGAPORE.
As a major shareholder in both Keppel Corporation and Sembcorp Marine, we think it would also be useful to share our perspectives with fellow shareholders.
We have noted increased commentary on the Proposed Combination of Keppel Offshore & Marine and Sembcorp Marine, and the letter by Sembcorp Industries (Sembcorp) to the Business Times on 25 August 2022 explaining the context behind the demerger of Sembcorp and Sembcorp Marine in 2020.
These highlight important issues for all shareholders to consider as they prepare to vote on the Proposed Combination at the respective EGMs of Keppel Corporation and Sembcorp Marine, expected to take place in the fourth quarter of 2022. As a major shareholder in both Keppel Corporation and Sembcorp Marine, we think it would also be useful to share our perspectives with fellow shareholders.
Temasek became a direct shareholder of Sembcorp Marine in 2020 following the demerger of Sembcorp Marine from its then-parent, Sembcorp. Along with the demerger, Sembcorp Marine carried out a S$2.1 billion Rights Issue to repay a loan of S$1.5 billion advanced by Sembcorp to Sembcorp Marine, and to strengthen its cash position and balance sheet. Temasek sub-underwrote the Rights Issue and took up the Rights Shares not subscribed by other Sembcorp Marine shareholders in the Rights Issue and received its pro-rata entitlement during Sembcorp’s distribution of Sembcorp Marine shares to its shareholders thereafter (based on our 49.3% shareholding in Sembcorp). The demerger and the 2020 Rights Issue resulted in Temasek acquiring a 42.6% shareholding in Sembcorp Marine. The financial outlay by Temasek in the 2020 Rights Issue was S$206 million.
In 2021, amidst the COVID-19 pandemic, Sembcorp Marine urgently needed to recapitalise to address business requirements and complete existing projects. The Board of Sembcorp Marine called for a S$1.5 billion Rights Issue to strengthen the company’s balance sheet, and continue its progress on its transformation journey, which included a Memorandum of Understanding for the Proposed Combination. Temasek participated in the Rights Issue based on commercial considerations. We voted in favour of the Rights Issue and agreed to subscribe for not only our pro-rata entitlements based on our 42.6% shareholding in Sembcorp Marine, but also any excess rights not taken up by other shareholders, up to 67% of the 2021 Rights Issue. The commitment, provided without the benefit of a whitewash waiver resolution, gave Sembcorp Marine certainty that it could raise the full S$1.5 billion that it needed. This resulted in Temasek having to make a Mandatory General Offer, at the Rights Issue Price. Shareholders tendered an additional 8.0% of Sembcorp Marine shares. The financial outlay by Temasek in the 2021 Rights Issue and Mandatory General Offer was S$942 million.
Since becoming a direct shareholder of Sembcorp Marine in 2020 through the demerger of Sembcorp and Sembcorp Marine, Temasek has made a significant investment of approximately S$1.1 billion in Sembcorp Marine through the 2020 Rights Issue, 2021 Rights Issue and Mandatory General Offer, resulting in an ownership of 54.6% in the company.
This year, Keppel Corporation and Sembcorp Marine announced the Proposed Combination, and both companies have clearly articulated the benefits of the merger. As a major shareholder in both companies, we fully support the rationale for the transaction and share the belief that all shareholders will benefit from being part of the Combined Entity.
We expect the Combined Entity to be well-positioned to achieve the necessary scale and synergies to become more competitive and to build a sustainable orderbook amidst the changing global energy environment. This is also well-aligned with our objective to catalyse the transition of our portfolio companies towards a Net Zero World.
With substantial value at stake through our shareholding in Sembcorp Marine, Temasek is fully aligned with fellow shareholders in seeking the best outcome for the company. We support the Sembcorp Marine Board’s expressed view that the Proposed Combination offers the best and most compelling way forward for Sembcorp Marine to unlock long term value for all of its stakeholders.
As a major shareholder of both Keppel Corporation and Sembcorp Marine, Temasek will abstain from voting on all resolutions relating to the Proposed Combination in the upcoming EGMs. The decision will therefore rest solely in the hands of the independent shareholders of both companies, who have to carefully consider the facts around the transaction. We hope our perspectives shared will be beneficial to fellow shareholders as they prepare to vote on the Proposed Combination.
Head, Portfolio Development Group