Sembcorp Marine 2021 Rights Issue

Sembcorp Marine would like to thank Shareholders for their support at the Extraordinary General Meeting, in subscribing for the Rights Shares and in enabling the successful completion of the Rights Issue.

Background

Sembcorp Marine Ltd (“Sembcorp Marine” or the “Group”) announced on 24 June 2021 a proposal to further raise approximately S$1.5 billion through a fully committed, renounceable Rights Issue of up to 18,833,468,826 new ordinary shares in the capital of the Company (“Rights Shares”) on the basis of 3 new shares for every 2 existing shares held (the “Rights Issue”).

The completion of the Rights Issue is integral to the Company’s strategy to recapitalise to address liquidity requirements and complete existing projects, as well as to support the Company’s strategic business transition towards the high-growth renewable and clean energy segment.

Results of the Rights Issue

Sembcorp Marine is pleased that the Rights Shares have been fully subscribed with a majority of the Shareholders subscribing for their entitlements and applying for Excess Rights Shares, and would like to thank all Shareholders for their support in enabling the successful completion of the Rights Issue.

As at the close of the Rights Issue on 14 September 2021, valid acceptances and excess applications were received for 22,174,559,198 Rights Shares, representing approximately 117.7 per cent. of the 18,833,459,491 Rights Shares available under the Rights Issue.

Details of the valid acceptances and excess applications received for Rights Shares are as follows:

	Number of Rights Shares	As a percentage of the total number of Rights Shares available under the Rights Issue⁽¹⁾
Valid Acceptances	15,863,376,096	84.2%
Excess Applications	6,311,183,102	33.5%
Total	22,174,559,198⁽²⁾	117.7%

Note:
⁽¹⁾ Rounded to the nearest decimal place.
⁽²⁾ The valid acceptances and excess applications received for Rights Shares includes the valid acceptance and excess application by Startree of 12,618,417,858 Rights Shares (comprising 8,029,689,702 Undertaken Pro Rata Rights Shares and 4,588,728,156 Undertaken Excess Rights Shares) pursuant to the Undertaking Agreement.

Applicants with valid acceptances of their provisional allotments of Rights Shares was allocated in full for such acceptances of 15,863,376,096 Rights Shares. The remaining 2,970,083,395 Rights Shares was allotted to satisfy excess applications for Rights Shares, and Startree Investments Pte. Ltd. (“Startree“) was allotted 1,247,628,449 of these remaining Rights Shares.

In the allotment of Excess Rights Shares, preference was given to the rounding of odd lots and Shareholders, other than Directors, Startree and Substantial Shareholders who have control or influence over the Company in connection with the day-to-day affairs of the Company or the terms of the Rights Issue, or have representation (direct or through a nominee) on the Board of Directors, ranked in priority. Directors, Startree and Substantial Shareholders who have control or influence over the Company in connection with the day-to-day affairs of the Company or the terms of the Rights Issue, or have representation (direct or through a nominee) on the Board of Directors, ranked last in priority for the rounding of odd lots and allotment of Excess Rights Shares.

As the Rights Shares have been fully subscribed, none of the Underwritten Rights Shares was underwritten by the Sole Financial Adviser, Manager and Underwriter pursuant to the Management and Underwriting Agreement.

Issue and Listing of Rights Shares

Pursuant to the Rights Issue, the 18,833,459,491 Rights Shares were allotted and issued as well as listed, quoted on the Main Board of the SGX-ST on 22 September 2021.

Based on the foregoing, the net proceeds raised by the Company from the Rights Issue are approximately S$1.5 billion.

The Rights Shares will, upon allotment and issue, rank pari passu in all respects with the then existing Shares, except that they will not rank for any dividends, rights, allotments or other distributions the record date for which falls before the date of allotment and issue of the Rights Shares.

Following the allotment and issue of the 18,833,459,491 Rights Shares, the number of issued Shares (including 6,223 treasury shares) will increase from 12,555,645,884 Shares to 31,389,105,375 Shares.

For more information, please refer to the announcement dated 17 September 2021.

Trading of Rights Shares and Odd Lots

Trading of the Rights Shares commenced with effect from 9.00 a.m. on 22 September 2021.

For the purposes of trading on the Main Board of the SGX-ST, each board lot of Shares will comprise 100 Shares. Shareholders who hold odd lots of Shares (that is, lots other than board lots of 100 Shares) and who wish to trade in odd lots on the Main Board of the SGX-ST should note that they are able to trade odd lots of Shares in board lots of one Share on the SGX-ST’s Unit Share Market.

Please refer to the announcement dated 21 September 2021 for more details.

Mandatory Conditional General Cash Offer

To comply with the requirements of The Singapore Code on Take-overs and Mergers (“Code”), Startree (the “Offeror”), an indirect wholly-owned subsidiary of Temasek Holdings (Private) Limited (“Temasek“), announced a mandatory conditional general cash offer on 22 September 2021 to acquire all the issued and paid-up ordinary shares (“Shares”) in Sembcorp Marine that it and its concert parties (collectively, the “Offeror Concert Party Group”) do not already own, at S$0.08 per Share in cash (the “MGO”).

As part of the Rights Issue, Startree provided an irrevocable undertaking to Sembcorp Marine to subscribe for its pro rata entitlement and excess Rights Shares such that its total subscription will be no more than 67.0% of the Rights Issue. As a result of its undertaking, Startree was issued approximately 9.3 million Rights Shares, resulting in a 4% increase in its aggregate shareholding from approximately 42.6%¹ prior to the Rights Issue to approximately 46.6%².

The increase in aggregate shareholding by more than 1% triggered an obligation, under the Code³, for Startree to make the MGO for the Shares of Sembcorp Marine that the Offeror Concert Party Group do not already own, at not less than the highest price at which the Offeror Concert Party Group has acquired Shares in the six months immediately preceding the announcement of the MGO. Consistent with its obligations under the Code, Startree has determined the Rights Issue price of S$0.08 to be such applicable highest price and accordingly, the offer price is S$0.08 per Share in cash (the “Offer Price“).

The Offer Price is final and Startree will not revise the Offer Price or any other terms of the MGO.

In compliance with the requirements of the Code, the MGO is conditional on the Offeror receiving valid acceptances such that the aggregate shareholding of the Offeror Concert Party Group exceeds 50% as at the close of the MGO. If the valid acceptances received are such that the aggregate shareholding of the Offeror Concert Party Group is less than or equal to 50% as at the close of the MGO, the MGO will not become unconditional and will lapse. All Shares tendered in acceptance of the MGO will then be returned to Shareholders.

The MGO will be open for acceptance by Shareholders for 28 days from the date of posting of the Offer Document. The Offeror does not intend to extend the MGO beyond the closing date of 28 days from the Offer Document.

It is the current intention of Startree for Sembcorp Marine to remain listed on the SGX-ST following completion of the MGO, but Startree reserves the right to re-evaluate its position, taking into account, among other things, the level of acceptances received by Startree in respect of the MGO and the prevailing market conditions at the relevant time.

For more information, please refer to the Offer Announcement dated 22 September 2021 and the related Press Release.

¹ Based on the then-existing Shares in issue as at the announcement of the Rights Issue, excluding treasury shares.
² Based on the Shares in issue as at the announcement of the MGO following the allotment and issuance of the Rights Shares, excluding treasury shares.
³ A mandatory general offer is triggered where any person who, together with its concert parties, holds between 30% and 50% of the voting rights of a company and such person, or any of its concert parties, acquires additional shares carrying more than 1% of the voting rights of the company in any six-month period.

Indicative Dates

Formal Announcement of MGO	22 September 2021, Wednesday (Singapore time)
Electronic dissemination of Offer Document	Between 6 October 2021, Wednesday and 13 October 2021, Wednesday (Singapore time)
Electronic dissemination of Sembcorp Marine’s Circular	Within 14 days after the despatch of the Offer Document
Closing Date of the MGO	28 days after posting of the Offer Document

Overview of the Rights Issue

Key Highlights

S$1.5 billion Renounceable Rights Issue

S$1.5 billion fully committed renounceable Rights Issue
Rights Issue size of up to 18.8 billion new shares
3 rights shares for 2 existing shares at S$0.08 per share
- 35.7% discount to TERP (Theoretical Ex-rights Price) based on last close of S$0.191
- 58.1% discount to last close of S$0.191 on 23 June 2021
Proceeds from Rights Issue to be utilised for working capital and general corporate purposes, including debt servicing.
Certainty of raising the full S$1.5 billion from the Rights Issue
- Irrevocable undertaking by Startree, an indirect wholly-owned subsidiary of Temasek, to subscribe for its 42.6% pro-rata entitlement and apply for excess rights shares, such that in aggregate it subscribes for up to 67.0% of the Rights Issue. As a result of its undertaking, Startree was issued 9,277,318,151 Rights Shares (comprising 8,029,689,702 Undertaken Pro Rata Rights Shares and 1,247,628,449 Undertaken Excess Rights Shares) pursuant to the Undertaking Agreement.
- Underwriting by DBS, the Sole Financial Adviser, Manager and Underwriter in respect of the Rights Issue to Sembcorp Marine, to take up the remaining 33.0% of the Rights Issue. As the Rights Shares was fully subscribed, none of the Underwritten Rights Shares were underwritten by DBS pursuant to the Management and Underwriting Agreement.

More information on the details of the Rights Issue can be found in Sembcorp Marine’s Offer Information Statement dated 26 August 2021 and SGXNet announcements which are accessible via this link and the SGX-ST website.

Background and Rationale for the Rights Issue

Strengthening Financial Position Amidst Continuing COVID-19 Disruptions
The offshore and marine sector has experienced a prolonged and severe downturn since 2015, following major structural changes in the sector, a collapse in oil prices, and the global energy transition away from oil. The onset of the COVID-19 pandemic in 2020 further delayed the industry recovery and created severe disruptions, including reductions in capital expenditure by oil majors and skilled manpower shortages. These disruptions have extended into 2021 with the re-imposition of COVID-19 restrictions to combat new waves of localised infections. For the Group, disruptions to yard operations have impacted the execution and completion of projects, along with deferrals of deliveries and payments by customers. This has created a short-term but significant draw on the Group’s working capital position.
The earlier rights issue completed in September 2020 had strengthened the Group’s financial position and allowed the Group to successfully pursue its strategic expansion towards the renewable and clean energy segments. The proceeds were used to reduce the Group’s leverage and debt servicing obligations by converting the S$1.5 billion Subordinated Loan owing to Sembcorp Industries Ltd into equity in Sembcorp Marine with the balance of approximately S$600 million to fund ongoing operations. However, the prolonged disruptions from COVID-19 have created near-term challenges for the Group. Please refer to the announcement dated 21 September 2021 on the use of the net cash proceeds from the 2020 Rights Issue.
The Board and Management of Sembcorp Marine believe that the further recapitalisation via the Rights Issue is required to strengthen the Group’s balance sheet, address the temporary working capital depletion and replenish liquidity to meet the projected operational funding requirements through to end 2022.

Positioning for Growth in Unprecedented Times
Proceeds from the S$1.5 billion Rights Issue will be used for working capital and other general corporate purposes, including debt servicing. The Rights Issue will also improve the Group’s net gearing as at 30 June 2021 from 0.92x to 0.29x on a pro forma basis, and its cash position will be improved by approximately S$1.5 billion. This will better position the Group to successfully execute existing projects, competitively bid for new high-value, large-scale projects, continue to augment its technological capabilities, and secure sustainable long-term growth by accelerating its strategic expansion towards the fast-growing renewable and clean energy segments, including offshore renewables.
While the outlook for oil exploration remains uncertain, the outlook for energy transition is robust, with large and growing addressable markets in areas such as renewable and clean energy.
The Group has already won several contracts in this segment, including:
- the Siemens’ Dudgeon Offshore Wind Farm Project which has been successfully completed and delivered;
- the offshore substation and reactive compensation station topsides for the Ørsted’s Hornsea 2 Offshore Wind Farm; and
- the High Voltage Direct Current (HVDC) offshore converter platform for the landmark RWE Renewables Sofia Offshore Wind Farm.
The Group’s continued expansion into these areas requires a robust balance sheet and working capital position, which the Rights Issue will facilitate.
Beyond the Rights Issue and as part of ongoing measures to improve the Group’s operating and financial performance, Sembcorp Marine has worked with an external consultant to develop a Performance Improvement Plan (“PIP”) to drive operational improvements and optimise its cost structure. The PIP will include strategic cost management initiatives, improved project execution and procurement processes, digitisation and an overall reduction of overheads. This will deliver significant savings and increase the competitiveness of the Group.

Summary of Key Benefits of the Rights Issue

In summary, the Rights Issue will have the following merits:

strengthens the Group’s financial position and replenishes temporary working capital depletion amidst continuing COVID-19 disruptions;
reinforces lenders’ and customers’ confidence in their continued partnerships with the Group;
enables the Group to continue to successfully execute existing projects and competitively bid for high-value and large-scale projects;
allows the Group to pursue strategic investments to further augment its technological capabilities and maintain its competitive edge; and
accelerates the Group’s strategic transition towards the high-growth renewable and clean energy segment, to secure sustainable long-term growth.

RELATED LINKS

Mandatory Conditional General Cash Offer

S$1.5 billion Rights Issue – Information, Rationale and Related Updates

Responses to Questions from Shareholders and Stakeholders

Not for distribution in the United States

This document is not for distribution, directly or indirectly, in or into the United States of America including its territories and possessions, any state of the United States and the District of Columbia (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”), or under the securities laws of any state of the United States and, accordingly, they may not be offered, sold, resold, granted, delivered, allotted, taken up, transferred or renounced, directly or indirectly, in the United States except pursuant to an applicable exemption from the registration requirements of the Securities Act. Accordingly, the provisional allotments of Rights Shares, the Rights Shares and the excess rights shares are being offered and sold only outside the United States in “offshore transactions” in reliance on Regulation S. No public offering of securities is being made in the United States.

IMPORTANT NOTICE

This document contains certain statements that are not statements of historical fact, i.e. forward-looking statements. These forward-looking statements are based on current expectations, projections and assumptions about future events. Although Sembcorp Marine believe that these expectations, projections and assumptions are reasonable, these forward-looking statements are subject to the risks (whether known or unknown), uncertainties and assumptions about Sembcorp Marine and its business operations, such as (without limitation) the general economic and business conditions in Singapore, the Asia-Pacific region and elsewhere; currency fluctuations between the Singapore dollar and other currencies; governmental, statutory, regulatory or administrative initiative affecting their business; industry trends; future levels and composition of their assets and liabilities; future profitability of their operations; competition; changes in Singapore tax or similar laws or regulations; changes in, or the failure to comply with, governmental regulations, including exchange control regulations, if any.

Investors are advised not to place undue reliance on the information in this document. Forward-looking events referred to in this document may differ materially or not occur due to these risks, uncertainties and assumptions. Investors should assume that the information in this document is accurate only as of the date it is issued. Sembcorp Marine does not have an obligation to update or revise any forward-looking statement, whether as a result of new information, future events or otherwise, except as required by law.

This document is for information only and does not constitute or form part of any offer or invitation to sell or issue or subscribe for, or any solicitation of any offer to acquire, any Rights Shares or to take up any entitlements to Rights Shares in any jurisdiction in which such an offer or solicitation is unlawful. No person should acquire any Rights Shares except on the basis of the information contained in the offer information statement to be lodged by Sembcorp Marine with the Monetary Authority of Singapore. The information contained in this announcement is not for release, publication or distribution to persons in the United States and should not be distributed, forwarded to or transmitted in or into any jurisdiction where to do so might constitute a violation of applicable securities laws or regulations. The issue, exercise or sale of Rights Shares and the acquisition or purchase of the Rights Shares are subject to specific legal or regulatory restrictions in certain jurisdictions. Sembcorp Marine assumes no responsibility in the event there is a violation by any person of such restrictions.

The distribution of this document, into jurisdictions other than Singapore may be restricted by law. Persons into whose possession this announcement and such other documents come should inform themselves about and observe any such restrictions. Any failure to comply with these restrictions may constitute a violation of the securities laws of any such jurisdiction. None of the content on are Sembcorp Marine’s website nor any website accessible by hyperlinks on their respective websites is incorporated in, or forms part of, this document.

The Directors collectively and individually accept full responsibility for the accuracy of the information given in this document, and confirm, after taking all reasonable care and making all reasonable enquiries that, the facts stated and the opinions expressed herein are fair and accurate and constitutes full and true disclosure of all material facts about the Rights Issue and the Group which are relevant to the Rights Issue and the Directors are not aware of any facts the omission of which would make any statement in this document misleading. Where information in this document has been extracted from published or otherwise publicly available sources or obtained from a named source, the sole responsibility of the Directors has been to ensure that such information has been accurately and correctly extracted from those sources and/or reproduced in this document in its proper form and context.