Keppel O&M and Sembcorp Marine Join Up in Offshore-Yard Megamerger

File image courtesy Keppel Corporation

Published Apr 26, 2022 10:54 PM by The Maritime Executive

Singaporean industrial conglomerates Keppel Corporation and Sembcorp have signed an agreement to merge their offshore shipyard divisions, Keppel O&M and Sembcorp Marine. Keppel's shareholders will end up owning about 56 percent of the combined entity, and Sembcorp Marine shareholders will own the balance. The entity's new name has not yet been released.

The merger has been a long time coming, and it reflects the financial pressures facing offshore yards. In January 2021, after years of contraction in the offshore oil and gas sector, Keppel O&M announced that it would exit its core offshore rig construction and repair business and refocus its efforts on renewables. Loh Chin Hua, the CEO of Keppel Corporation, described the transition as a series of “bold and decisive moves to transform Keppel O&M to ensure that it remains relevant and competitive." 

At the time, Keppel said that it was also exploring "inorganic options" for restructuring. Five months later, Keppel and Sembcorp signed an MOU to explore a merger, and that agreement has now been actualized.

According to the two rig builders, the combined company will be well-prepared to compete for "opportunities arising from decarbonization in the oil & gas sector and from the global energy transition towards renewables." The potential opportunities could include infrastructure for wind, hydrogen and ammonia markets.

After the transaction, Singaporean state investment corporation Temasek will be the largest shareholder of the combined entity with a 33.5 percent stake.  Keppel O&M will sell all of its legacy rigs and unpaid accounts to a separate holding vehicle, which will be 90-percent owned by outside investors.

The deal frees up Keppel Corporation to focus on its real estate, utility, data center, telecom, finance and logistics business lines. 

"[The agreement] brings together two leading O&M companies in Singapore to create a stronger player that can realize synergies and compete more effectively amidst the energy transition," said Loh Chin Hua in a statement. "Together with the resolution of Keppel O&M’s legacy rigs, this is a major step forward in Keppel’s Vision 2030 journey, as we simplify our business and sharpen our focus on providing solutions for sustainable urbanization."