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Sembcorp proposes recapitalisation and demerger

By: Tom Russell 08/06/2020 Sembcorp

General Substations

Sembcorp Industries and Sembcorp Marine are proposing the recapitalisation of Sembcorp Marine through a S$2.1 billion renounceable rights issue (the “Rights Issue”), followed by a proposed demerger of the two companies via a distribution in specie of Sembcorp Industries’ stake in the recapitalised Sembcorp Marine to Sembcorp Industries shareholders.

The boards and management teams of Sembcorp Industries and Sembcorp Marine stated that the proposed Rights Issue and the Proposed Distribution will strengthen the two companies’ financial positions and will unlock shareholder value.

In addition, the transaction will enable Sembcorp Industries and Sembcorp Marine to better focus on their respective industries. With greater flexibility following the demerger, both companies can pursue their own sustainable growth paths on the back of industry changes in recent years.

Sembcorp Industries will continue to be focused on its core areas of energy and urban development, and be poised to capture opportunities in sustainable energy transition, while Sembcorp Marine builds on its core engineering solutions for the offshore, marine and energy industries.

Sembcorp Marine has been doubly hit by the COVID-19 pandemic and recent collapse in oil prices. The transaction is expected to allow the company to better address its urgent need to recapitalise, meet liquidity requirements, and strengthen its balance sheet to ride through the prolonged downturn in the offshore and marine industry.

Sembcorp Industries and Sembcorp Marine will be seeking their respective shareholders’ approval for the Transaction at Extraordinary General Meetings (EGMs) which are expected to be convened around end August / early September 2020. The Rights Issue is also conditional on Sembcorp Marine shareholders passing a resolution to waive their rights to receive a general offer from Temasek and its concert parties in connection with the Proposed Distribution.

Sembcorp Industries has given an undertaking to vote in favour of the Rights Issue resolution at Sembcorp Marine’s EGM. The Proposed Distribution and the Rights Issue are inter-conditional, and will only proceed if shareholder approvals are received for all resolutions at both companies’ EGMs.

Upon completion of the proposed Transaction, Temasek will be a direct and significant shareholder of both Sembcorp Industries (approximately 49.3%) and Sembcorp Marine (stake exceeding 29%).

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Sembcorp proposes recapitalisation and demerger

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