What You Should Know About Sembcorp Marine's (SGX: S51) Rights Issue and Potential Merger With Keppel Corporation's (SGX: BN4) Offshore & Marine Business

Big news emerged from Sembcorp Marine (SGX: S51) and Keppel Corporation Limited (SGX: BN4) after the Singapore stock market closed on Thursday, 24 June.

Here’s what you should know about the announcements in under a minute.

Potential Merger

Sembcorp Marine and Keppel Corporation have signed a non-binding memorandum of understanding (MOU) so that they can have exclusive negotiations to combine Sembcorp Marine and Keppel Offshore & Marine (O&M).

The aim is to create a stronger merged entity in response to major changes in the global O&M engineering and energy sectors.

Both companies said that the discussions are at a preliminary stage and that there’s no certainty that the potential combination will take place.

Further updates will be provided as and when they emerge.

Sembcorp Marine Rights Issue

Sembcorp Marine also announced a S$1.5 billion renounceable underwritten rights issue.

The rights issue will be on the basis of three Sembcorp Marine rights shares for every two shares in Sembcorp Marine held by a shareholder.

The issue price will be at S$0.08 per rights share, which is at a 58.1% discount to Sembcorp Marine’s closing share price of S$0.191 on 23 June 2021.

The rights issue is renounceable, which means that it is transferable, and therefore can be bought or sold on the stock market.

Sembcorp Marine will use proceeds from the rights issue for working capital and general corporate purposes, including debt servicing.

Specifically, the rights issue provides cash to meet Sembcorp Marine’s projected operational funding requirements until at least the end of 2022.

Sembcorp Marine will be seeking shareholders’ approval for the rights issue at an extraordinary general meeting (EGM), which is likely to take place in August 2021.

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Disclaimer: The information provided by Seedly serves as an educational piece and is not intended to be personalised investment advice. ​Readers should always do their own due diligence and consider their financial goals before investing in any stock. The writer may have a vested interest in the companies mentioned.