Temasek Backs Away From $3B Bid for Rig Builder Keppel

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Singaporean state investment firm Temasek has backed out of a bid to buy a controlling stake in Keppel Corp., the parent company of offshore shipbuilder Keppel Offshore & Marine. 

Last October, Temasek reached an agreement to acquire an additional 30 percent stake in Keppel Corp., which would have brought its total to about 51 percent. The terms of the $3 billion deal required Keppel to keep its profits from falling by more than $400 million over the course of the following year. Keppel reported a loss of more than $500 million last quarter, and its executives acknowledged that this could be seen as a breach. 

The heavy losses were due primarily to a $670 million impairment for the declining value of Keppel Offshore & Marine’s holdings. If not for the impairment, the firm would have posted a profit of $160 million. 

In a regulatory filing Monday, Keppel said that Temasek had decided to exercise a contract clause that would allow it to back out of the deal. “The offeror has decided that it will invoke the [profitability] pre-condition, and accordingly, is announcing today that the [agreement] will not proceed,” Keppel reported.

“We continue to believe in the inherent value of Keppel’s business, and have a strong balance sheet and support from our network of banks to finance the group’s operations and growth initiatives,” the firm said in a statement. “Notwithstanding the withdrawal of the [offer], we intend to engage Temasek, which remains our single largest shareholder, to explore opportunities for strategic collaboration.”

This year, Keppel Marine and Offshore faced an additional operational challenge in the form of a COVID-19 outbreak in its foreign worker dormitories. The coronavirus cluster at its Singapore shipyard started on April 2 and was only declared officially closed on August 5.

Keppel is also pushing back on an attempt by UK-based rig operator Awilco Drilling to end the construction contract for a $425 million semisub, the future Nordic Winter. Awilco – which had been struggling to make an installment payment for the rig – alleged that Keppel breached its contract. A breach would allow Awilco to avoid further payments and claim a refund of $54 million. Keppel denies Awilco’s allegations and has cautioned that it could seek further compensation if Awilco fails to pay its next installment.

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