Singaporean rig builders Keppel Corporation and Sembcorp Marine have confirmed they are in talks over a merger of their offshore and marine (O&M) businesses.
The companies said the tie-up would create a stronger combined entity and was in response to dramatic changes in the O&M engineering and energy sectors.
News that talks were being held was broken earlier by Reuters.
In a joint statement issued later, Keppel and Sembcorp said a sustained reduction in oil exploration and development activities, exacerbated by Covid and the energy transition, had slashed trade.
While the outlook for oil exploration uncertain, Keppel O&M and Sembcorp Marine are pivoting to the renewables sector.
Orders secured by Keppel O&M include two converter stations for TenneT Offshore, two offshore wind farm substations for Orsted, and one of the world’s largest offshore wind turbine installation vessels for Dominion Energy.
Sembcorp Marine’s wins include contracts for the Siemens’ Dudgeon Offshore Wind Farm Project, offshore substation and topsides for the Ørsted’s Hornsea 2 Offshore Wind Farm, and the HVDC offshore converter platform for the landmark RWE Renewables Sofia Offshore Wind Farm.
Both parties said the merger, if completed, would create a stronger player to capitalise on growing opportunities in the O&M and renewables sectors.
Sembcorp Marine’s investors would hold shares in the combined entity, while Keppel will receive shares and a cash consideration of up to S$500 million.
Keppel will hold 50% of a 50-50 joint venture that will be established between Keppel and the combined entity.
The duo pledged to remain focused on preserving operational strengths, and on continuing to attract and retain local talent.
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 Co that would be majority owned by external investors.