Sembcorp Marine 2021 Rights Issue
Sembcorp Marine Limited (“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”), which is expected to be completed in the third quarter of 2021.
Key Highlights of the Proposed Transaction
S$1.5 billion Renounceable Rights Issue
Further details on the transaction rationale, details of the Rights Issue and the implications which may arise therefrom(2) can be found in Sembcorp Marine’s SGXNet announcements which are accessible via this link and the SGX-ST website.
(1) TERP – Theoretical ex-rights price
(2) The fulfilment by Startree of its obligations under the irrevocable undertaking may result in Temasek and its concert parties incurring an obligation to make a mandatory general offer (the “Compliance Offer”) for the remaining Shares, in compliance with Rule 14 of the Singapore Code on Take-overs and Mergers. If the Compliance Offer is required to be made, (a) based on information available to Temasek to date, the offer price the Temasek Concert Party Group will be obliged to offer will be the Rights Issue Price; and (b) Temasek’s current intention is to maintain the listing status of the Company.
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 pivot 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.
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.
Fortifying for Growth
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 from 0.75x to 0.25x on a pro-forma basis as of 31 December 2020. 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 pivot 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 engaged 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.
Upon receipt of applicable approvals from the SGX-ST, the Group will seek shareholders’ approval for the Rights Issue at an EGM, which is expected to be convened in August 2021. Startree has given an irrevocable undertaking to vote in favour of the resolution to approve the Rights Issue.
The circular outlining the details of the Rights Issue and Notice of EGM will be despatched in due course. The Record Date will also be announced in due course.
Proposed S$1.5 billion Rights Issue – Information, Rationale and Related Updates
- Responses to Investor and Media Queries (19 July 2021)
- Clarification of The Business Times Article dated 5 July 2021 (7 July 2021)
- Analysts Briefing Transcript – Rights Issue & Potential Combination (25 June 2021)
- Media Briefing Transcript – Rights Issue & Potential Combination (24 June 2021)
- Media Release / SGX Announcment – Rights Issue & Potential Combination (24 June 2021)
- Rights Issue Launch Announcement (24 June 2021)
- Presentation – Rights Issue & Potential Combination (24 June 2021)
- Trading & Liquidity Update (24 June 2021)
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.
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.