A new year, a new beginning! How will Keppel share price unravel in 2023? Time flies. It has been more than one and a half year since Keppel Corp entered into a non-binding MoU with Sembcorp Marine to combine Keppel Offshore & Marine (KOM) and Sembcorp Marine. Under the deal, KOM will be merged with Sembcorp Marine. In addition, Keppel will receive shares in the listed entity and a cash consideration of up to $500 million. Given the protracted negotiations, investors must be feeling impatient. Will the deal go through or not?
During this period, the oil and gas sector has seen a remarkable recovery as crude oil price smashed past US$120 per barrel in March 2022 with the onset of the Russia-Ukraine war. While oil prices had cooled down since then, the demand for oil-rigs had been healthy in 2022. Against this backdrop, investors must be wondering if Keppel Corp should continue with the merger. Notwithstanding this, Keppel Corp investors had voted in favour of the 2 resolutions during the extraordinary meeting held on 8 December 2022 (99.96%).
Even though Keppel investors had voted overwhelmingly for the merger, it is not a done deal yet. In life, never say never. Let’s not forget that in 2020, Temasek Holdings invoked the pre-condition of material adverse change in Keppel Corp’s financial performance and walked away from the partial offer deal. That epic move led to a calamity for Keppel share price, which plunged to $4.10 on 25 September 2020. That was the lowest point for Keppel share price in the past decade.
Overall, I view this merger positively as it would fit into the Group’s Vision 2030 – focusing on business areas that are asset-lite. Although KOM’s orderbook business can propel Keppel share price, this type of business is often cyclical in nature and does not bring recurring income. Over the long run, this transformation is likely to bode well for Keppel share price.
On Keppel side, this deal is massively complicated as it consists of three parts – Asset Co. Transfer, KOM Pre-Combination Restructuring and KOM merger with Sembcorp Marine. I will share my insights these three parts and analyse how the impacts on Keppel share price.Note that this is an opinion article and not meant to be a financial advice. Please do your due diligence or engage financial advisors before investing in the stock market. I am not vested in Keppel Corp at the moment. Whether Keppel share price will surge or collapse has no impact on me. Thus, this article is not meant to induce readers to make any form of investment decisions.
Part 1: Asset Co. Transfer to unlock value for Keppel share price?
On the surface, the Asset Co. Transfer may not appear to be related to the merger with Sembcorp Marine. However, my thinking is that the intention is really to [This is a premium article. The rest of the content is blocked and can be accessible by SG Wealth Builder Members only. To read the full content, please sign up as member.]Lifetime Membership
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