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SembCorp Industries
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CheeryVGoh
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24-Aug-2020 12:27
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SCI to hive off Sembmarine to its shareholders latter plans S$2.1b rights SCI proposing to offset its entitlements with S$1.5b loan owed by subsidiary Temasek to sub-underwrite S$600m of the cash call TUE, JUN 09, 2020 - 5:50 AM ANITA GABRIEL[email protected]@AnitaGabrielBT Sembcorp Industries (SCI) and its marine arm Sembcorp Marine (SMM) unveiled on Monday a massive S$2.1 billion recapitalisation deal for SMM - plus a " demerger" from each other with Singapore' s Temasek Holdings ending with a direct stake in SMM. SEMBCORP Industries (SCI) and its marine arm Sembcorp Marine (SMM) unveiled on Monday a massive S$2.1 billion recapitalisation deal for SMM - plus a " demerger" from each other with Singapore' s Temasek Holdings ending with a direct stake in SMM. The two-step plan is aimed at beefing up both companies' financial positions and unlocking shareholder value and is in the best interests of their respective shareholders, the companies said in a joint statement on Monday. Under the proposed deal, SMM seeks to raise S$2.1 billion from a five-for-one renounceable rights issue of up to 10.5 billion new shares at an issue price of 20 Singapore cents each. To ensure deal certainty, SCI has undertaken to subscribe for its S$1.27 billion pro-rata entitlement, plus take up an additional S$230 million - if necessary - bringing its total commitment to S$1.5 billion. SCI, which owns 61 per cent of SMM, said it plans to do this by setting off a S$1.5 billion subordinated loan that it had extended to SMM back in mid-2019. The rights price represents a 31 per cent discount to the theoretical ex rights price (TERP) based on Sembmarine shares' five-day volume weighted average price (VWAP) of 74 Singapore cents. The equity rights issue is a critical lifeline for SMM - one of the world' s largest rig builders - that has been weighed down by a crippling oil crash caused by the Covid-19 pandemic. The company is facing project delays and scant new jobs. It said the cash call will improve its cash position, fund ongoing commitments, strengthen its balance sheet to ride through the prolonged downturn and win new projects. The second part of the exercise (both are inter-conditional upon each other) involving a " clean separation" is no less significant. Both firms will part ways, with SCI freeing itself from the cyclical marine business that has bogged down the conglomerate and overshadowed its decent utilities business amid a prolonged oil slump. The demerger will be done via a distribution in specie of SCI' s stake in SMM (post recapitalisation) to SCI shareholders on a prorata basis as dividends. SCI shareholders stand to get between 427 and 491 SMM shares for every 100 SCI shares owned - with no cash outlay. As a result of the split, SCI will become a focused energy and urban business and be poised to grab opportunities in the global energy transition, said SCI group president and chief executive Neil McGregor in a media briefing held over Zoom on Monday. As for SMM, with steadier financial metrics post-rights - net gearing will fall to 0.45 times from 1.82 times while net tangible assets will rise to S$4 billion from S$1.9 billion - it will be better able to position itself as a leader in engineering solutions for the offshore & marine and energy industries, said SMM president and CEO Wong Weng Sun. Post transaction, Temasek' s stake in SCI will remain unchanged while the state investment firm could end up with anything between 29.9 per cent and 58 per cent of SMM depending on shareholders' take-up of the rights issue. SCI and SMM will seek shareholders' go-ahead on the proposed distribution and rights issue respectively at a meeting to be held end-August or early September and the transaction is expected to be completed in the final quarter. DBS is the sole financial adviser for SCI' s proposed distribution and the sole financial adviser, lead manager and underwriter for SMM' s rights issue. Trading in the shares of both companies have been halted since last Thursday pending the announcement. SMM was last traded at 85 Singapore cents and SCI at S$1.53. The latest deal brings to an end long-held expectations in the investing community on the privatisation of SMM by SCI. SMM recently gave a gloomy update on the impact from the virus outbreak, saying that containment measures have disrupted transportation, supply chains, manpower access and plant operations and slashed energy demand and adversely impacted its business. When asked, Mr McGregor admitted that while SCI had considered a " range of options" including privatisation of SMM, such an exercise wouldn' t have solved the need to recapitalise the marine firm. " The proposed transaction that we have on the table addresses that completely," he replied. The latest announcement however is likely to galvanise one other long-held speculation involving the companies - that of a mega merger between SMM and Keppel O& M to create what one analyst called a " global power house" . Temasek' s partial offer for control over Keppel Corp too, has fuelled such talk. Ke Yan of Aequitas Research and a SmartKarma insight provider said: " We believe the SMM rights issue and demerger is paving the way for the consolidation of the O& M industry in Singapore....(it) represents Temasek' s determination to consolidate the two major players under one roof. Though it will take time, it is getting closer." |
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mesuper
Member |
24-Aug-2020 12:17
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SCI has undertaken to subscribe for its S$1.27 billion pro-rata entitlement, plus take up an additional S$230 million - if necessary - bringing its total commitment to S$1.5 billion.
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eugesun
Elite |
24-Aug-2020 11:45
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Sure can buy at higher price, seems no one buying now, so I chicken out...lol
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ADS2200
Veteran |
24-Aug-2020 11:45
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mesuper, thanks. temasek is straightforward $600m sorry don' t mind me asking. why sci fork out 230m ? thot the loan is $1.5b
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ckmpd1
Supreme |
24-Aug-2020 11:35
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From the way SCM rights are traded, it looks like SCI SH will get closer to 4900 rather than 4200 scm to 1000sci. That is good news for SCI share holders
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mesuper
Member |
24-Aug-2020 11:27
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1) SMM seeks to raise S$2.1 billion from a five-for-one renounceable rights issue. If no one exercises the rights, SCI needs to fork out 230m and TH will support 600m to ensure fully subscribed... If I am SCI or TH, I will ensure SMM price is above 20 cents so that they no need to pay the 230m + 600m 2) If SMM price below 20 cents, it is possible for SCI or TH to fail the underwriter condition which also choose to abandon the rights.
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ckmpd1
Supreme |
24-Aug-2020 11:16
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Why cannot buy? If you think it is worth buying, buy it at $1.82 instead of que-ing at $1.81
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ADS2200
Veteran |
24-Aug-2020 11:16
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interesting! why if no other players exercised the rights, smm shr is not diluted that much ? rightly rights exercise the share will be diluted | ||||
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eugesun
Elite |
24-Aug-2020 11:14
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So little volume, even i want to buy I cannot get. Good sign that everyone is waiting for free shares..... | ||||
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mesuper
Member |
24-Aug-2020 10:51
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1) TH and SCI is the major player to subscribe the rights to fund SMM, however if I am TH and SCI, I want other shareholders including retail players to follow too. 2) if no other players exercise the rights, i.e. SMM share is not diluteed that much, SMM price will go up too. | ||||
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desmodeus
Veteran |
24-Aug-2020 10:44
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just mean TH and SCI will subcribed fully and SCI shareholders will get the maximum no. of smm entitlements
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mesuper
Member |
24-Aug-2020 10:41
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The objective to issue the SMM rights is to collect funds from shareholders... if SMM price drops below 20 cents, it makes the rights worthless, i.e. failed the objective. Hence, SMM price should not drop below 20 cents, SMM big share holders will not allow this to happen. If SMM price doesnt drop, SCI price will have its support. | ||||
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tangoanna
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24-Aug-2020 10:37
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Worthless based on the market supply/demand now...
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ADS2200
Veteran |
24-Aug-2020 10:33
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m/thanks. i was contemplating to buy smm. looking at the way it goes, likely to go below 20c. now it makes more sense to buy after 27 aug the way bb is pushing ms and rts also gone. maybe should buy sci for every 100sci get 427smm free. but i was told after xe, sci price will also drop. woah .... very complex sum
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ckmpd1
Supreme |
24-Aug-2020 10:21
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Worthless is your view without basis. Temasek certainly doesnt think SCM is worthless. Neither do I nor scm shareholders. It is trading at 20c and is at least worth 20c
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uiop1223
Supreme |
24-Aug-2020 10:19
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Worthless because most likely, SMM shares will trade below 20cents after the rights shares start trading in mkt. if the sentiment is that SMM share are worth 21cents, there should be buying of SMM rights since the total cost is $0.201 per share. The reason is that people expect SMM shares to trade below $0.20 upon completion of rights issue. Look at SIA MCB. I recalled the MCB rights were not taken up at $0.001. What is the issue price ($1) vs current price ($0.9) now?
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Laurenpanna
Veteran |
24-Aug-2020 10:12
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i also blur reading so many different article and saying. But it does not make me sway from my initial decision. Which is, to hold until XE . (whether sell or average down by then, see my mood) after that HOLD the SMM shares till some decision is announced. |
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ADS2200
Veteran |
24-Aug-2020 10:10
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m/thanks. i don' t get it / buy scm ms now is higher than buy the rights which is 20.5 - 21c. isn' t it better to buy the rts convert to ms which abt 20.1c ? is the person wants to sell the rts meaning they are not prepared to take up ?
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eugesun
Elite |
24-Aug-2020 10:03
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Oh yes, maybe next 2 weeks time before the final free shares quantity fixed. People are confused with number of shares and share value here, I get free share becasue I am given a sum of share without paying a cent. That is free share. The value of shares are depends on individual investor expectation and potential of SCI and SCM, who knows SCM value may go up to $5 in future. I am getting free quantity of shares and selling shares at a profit is 2 different thing....
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TigerPlay
Master |
24-Aug-2020 10:01
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Hahaha, i see until blur liaow, some say 2.30, some 3, some even 5. But, another group say SCi only worth 90cts or so, SCm is 15cts, 4 x 15 =60, so plus 90+60=150. i oso blur liaow. Anyway, we can only do our maths here and there, at the end of day, still BB decide the price. so just take all the saying with a pin of salt nia. No need be angry with anyone, since Nobody really knows actually, only the Doo Shen which is the BB know the actual price. That just my tot only too.....i oso dun know...Here say here Song...
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