Temasek abandons $4 billion bid for Keppel after conglomerate's loss

SINGAPORE - Singapore’s Temasek Holdings is terminating its $4 billion conditional offer for conglomerate Keppel Corp by invoking a material adverse change (MAC) clause following the company’s poor financial results.

Keppel’s large second-quarter loss that breached a threshold in the state investor’s offer to buy control of the company had raised the risk Temasek would abandon the deal.

“The offeror has decided that it will invoke the MAC pre-condition, and accordingly, is announcing today that the partial offer will not proceed,” a Temasek subsidiary said in a Singapore bourse statement on Monday, a public holiday.

Its decision is still likely to surprise markets as expectations had mounted Temasek would lead much-needed consolidation in the rig-building sector after taking majority control of Keppel.

The domestic rig-building sector has been battered by a long period of low oil prices exacerbated by the coronavirus crisis.

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Anticipation of a deal strengthened in June, when Temasek backed a $2.1 billion rights issue by Sembcorp Marine, Keppel’s smaller competitor.

“The withdrawal will put a spanner in the works - it was widely expected that there would be some alliance between Keppel’s marine business and Sembcorp Marine with Temasek being the largest mutual shareholder,” Justin Tang, head of Asian research at United First Partners, said.

Last October, Temasek offered to increase its one-fifth stake in Keppel to 51per cent.

Keppel, whose businesses range from property development to rig-building, sank into a net loss of $697 million for April to June, from a net profit of $153 million a year earlier - its biggest quarterly loss in at least 15 years, Refinitiv data showed.

Keppel shares ended last week at S$5.40, down 20per cent this year, below Keppel’s offer price of S$7.35.