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Business deals

Singapore conglomerate Keppel loses Temasek's $3bn bid

Company's restructure now in doubt as COVID pandemic continues to bite

Keppel on July 30 reported a net loss of SG$697 million due to impairment costs incurred in its offshore and marine business.   © Reuters

SINGAPORE -- Singapore's Keppel Corp. said Monday that state investment firm Temasek Holdings was withdrawing from a bid to acquire the conglomerate due to its worsening financial performance, leaving the company's restructure plan in doubt.

Temasek holds about 20% of Keppel, which is involved in offshore rig building -- one of the key pillars of the city-state's economy -- as well as property and infrastructure development. Last October, Keppel announced that Temasek would buy an additional 30.55% stake from existing shareholders, which translated into a total investment of about 4 billion Singapore dollars ($3 billion).

The deal would have paved the way for Keppel to restructure its business. Even before the coronavirus pandemic hit the region, Keppel had been struggling because of a slump in the rig business as a result of weak oil prices.

The deal would have paved the way for Keppel to restructure its businesses. 

According to Keppel's filing to the local stock exchange on Monday, Temasek was withdrawing the bid due to a material adverse change in Keppel's financial performance. A condition for the deal was that Keppel's business did not deteriorate further.

"The offeror has decided that it will invoke the [material adverse change] pre-condition, and accordingly, is announcing today that the [offer] will not proceed," the filing stated.

Keppel on July 30 reported a net loss of SG$697 million, plunging into the red from a net profit of SG$153 million a year ago, due to impairment costs incurred in its offshore and marine business. It was the largest quarterly loss for the company in at least two decades.

Monday is a public holiday marking Singapore's National Day on Aug. 9. Investors would be watching the performance of Keppel shares on Tuesday when the stock market reopens. Keppel shares closed at SG$5.40 each on Friday.

The outlook for the offshore rig business remains uncertain due to weak oil prices. Moreover, Keppel employs a large number of migrant workers in its shipyards, but most of them have not been able to work due to a massive coronavirus outbreak in their dormitories.

Temasek had intended to work with Keppel in undertaking "a comprehensive strategic review of its businesses," which might have resulted in Keppel refocusing on certain businesses, and/or corporate actions such as disposals and mergers, it said when the deal was first announced last October.

Without the backing, and struggling with restrictions stemming from the pandemic, Keppel faces a difficult time. It did not specify how the withdrawal would affect its outlook in its filing on Monday.

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