TL;DR
We like the proposed combination between Sembcorp Marine (SMM) and Keppel Offshore & Marine. On its own, SMM may continue to struggle due to slower order wins and high fixed costs. The combination could bring about synergies as the combined entity would have a stronger financial position and larger orderbook.These benefits could more than offset investor concerns on issuance of more SMM shares and a potential selldown of SMM shares by Keppel shareholders following the completion of the transaction.What happened?
Shareholders of Sembcorp Marine (SMM) will vote on its acquisition of the offshore and marine arm of Keppel Corp (KOM) on 16 Feb 2023.
SMM will be paying S$4.5b for KOM. It will issue 36.8b new SMM shares valued at 12.2 cents each.
Keppel will distribute 33.4b of the shares to its shareholders, at a ratio of 19.1 new SMM shares for 1 Keppel share.
After the exercise, Temasek’s stake
...
