This document is not for publication or distribution, directly or indirectly, in or into the United States (including its territories and possessions, any state of the United States and the District of Columbia), Canada or Japan. This document is not an offer of securities for sale into the United States, Canada or Japan. The provisional allotments of Rights Shares (as defined below), the Rights Shares and the excess Rights Shares referred to herein have not been and will not be registered under the U.S. Securities Act of 1933, as amended (the “Securities Act”), and may not be offered or sold in the United States or to, or for the account or benefit of, U.S. persons (as such term is defined in Regulation S under the Securities Act), except pursuant to an applicable exemption from registration. No public offering of securities is being made in the United States.
– S$2.1 billion renounceable Rights Issue by Sembcorp Marine will strengthen its cash position and balance sheet
- Sembcorp Marine will undertake a 5-for-1 Rights Issue (5 Rights Shares for every 1 Sembcorp Marine share held) at a Rights Issue Price of S$0.20 per share
- Rights Price represents a 31.0% discount to the TERP1 based on 5 day2 VWAP3 of S$0.74
- Sembcorp Industries has undertaken to subscribe for up to S$1.5 billion of Rights Shares by setting off the S$1.5 billion outstanding under its Subordinated Loan extended to Sembcorp Marine. Temasek has agreed to sub underwrite the remaining S$0.6 billion
- Proposed demerger of Sembcorp Industries and Sembcorp Marine via a distribution in specie of Sembcorp Industries’ stake in the recapitalised Sembcorp Marine to Sembcorp Industries shareholders as dividends
- Sembcorp Industries shareholders to receive between 427 and 491 Sembcorp Marine shares for every 100 Sembcorp Industries shares owned, with no cash outlay required
Sembcorp Industries and Sembcorp Marine are today 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 (the “Proposed Distribution”) of Sembcorp Industries’ stake in the recapitalised Sembcorp Marine to Sembcorp Industries shareholders.
The boards and management teams of Sembcorp Industries and Sembcorp Marine believe that the proposed Rights Issue and the Proposed Distribution (collectively, the “Transaction”) will strengthen the two companies’ financial positions and will unlock shareholder value, and is in the best interests of their respective shareholders.
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 changes to their industries in recent years.
Upon completion of the proposed Transaction, both Sembcorp Industries and Sembcorp Marine will have strong shareholder bases to support the respective companies’ strategies and business models for the long term.
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, which has been doubly hit by the COVID-19 pandemic and recent collapse in oil prices, will also be able 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.
Wong Weng Sun, President & CEO of Sembcorp Marine, said: “We believe that the Rights Issue will give us much needed financial strength to ride through the prolonged industry downturn and prepare for recovery. This recapitalisation will improve our cash position, fund ongoing financial commitments, strengthen our balance sheet and ensure long-term viability. We thank the board, management and staff of Sembcorp Industries for their steadfast support through the years and look forward to working with all shareholders to generate sustainable returns.”
Neil McGregor, Group President & CEO of Sembcorp Industries, said: “We believe that the proposed demerger will unlock shareholder value by transforming Sembcorp Industries into a focused business that can compete and capture growth opportunities in the energy and urban sectors. In addition, our shareholders will also receive value in the form of shares in a stronger recapitalised Sembcorp Marine through the proposed distribution in specie.”
Upon completion of the proposed Transaction, Temasek will be a direct and significant shareholder of both Sembcorp Industries (approximately 49.3%4) and Sembcorp Marine (stake exceeding 29%).
Nagi Hamiyeh, Joint Head, Investment Group, and Head, Portfolio Development of Temasek, said: “We recognise these are difficult times and the companies are operating in an uncertain and volatile world. There are challenges to the business environments in which both companies operate. However, we will work actively with the boards and management teams of both companies as they address these current challenges, and with an eye to the future, as they identify pathways for long term growth. We especially see opportunities for each of the companies to apply focus and their skills to sustainable solutions, which are of increasing importance to all stakeholders as our companies strive for Purpose, Profit and Planet.”
Key highlights of the proposed Transaction
1. S$2.1 billion renounceable Rights Issue
• Sembcorp Marine to undertake a S$2.1 billion renounceable Rights Issue
• 5 for 1 at S$0.20 per share
o 31.0% discount to TERP based on 5-day VWAP of S$0.745
o 35.1% discount to TERP based on last close of S$0.85
o 76.5% discount to last close of S$0.85 on 3 June 2020
• Sembcorp Industries has irrevocably undertaken to subscribe for its pro rata entitlement of S$1.27 billion and take up an additional S$0.23 billion if necessary – a total commitment of up to S$1.5 billion
• Sembcorp Industries will set off its outstanding S$1.5 billion subordinated loan extended to Sembcorp Marine in June 2019 (the “Subordinated Loan”), to subscribe for the Rights Issue; the Subordinated Loan will convert into equity on Sembcorp Marine’s balance sheet
• Temasek has agreed to sub-underwrite the remaining S$0.6 billion of the Rights Issue with no sub-underwriting fees
2. Proposed Distribution of Sembcorp Marine shares to Sembcorp Industries shareholders
• After the completion of the Rights Issue, Sembcorp Industries proposes to undertake a distribution of its stake in the recapitalised Sembcorp Marine to Sembcorp Industries shareholders on a pro rata basis as dividends
• Sembcorp Industries shareholders will receive between 427 and 491 Sembcorp Marine shares for every 100 Sembcorp Industries shares owned, with no cash outlay, depending on the total number of Sembcorp Marine shares held by Sembcorp Industries after the Rights Issue
• The transaction will result in the demerger of Sembcorp Marine from Sembcorp Industries
The full Transaction Rationales for Sembcorp Industries and Sembcorp Marine, as given in their respective SGX announcements, are attached as appendices.
Further details of the Proposed Distribution and Rights Issue can be found in Sembcorp Industries’ and Sembcorp Marine’s SGX announcements which are available on the SGX-ST website and the respective companies’ websites.
Circulars outlining the details of the Proposed Distribution and Rights Issue are expected to be despatched 14 clear days before both companies convene their EGMs around end August / early September 2020. The Record Dates are expected to follow thereafter.
DBS Bank Ltd is the Sole Financial Adviser to Sembcorp Industries in respect of the Proposed Distribution. DBS Bank Ltd is the Sole Financial Adviser, Lead Manager and Underwriter to Sembcorp Marine in respect of the Rights Issue. Credit Suisse (Singapore) Limited is the Sole Financial Adviser to Temasek.