Stock Exchange Announcements

Jul 13, 2006
Category: 2006

SembCorp Marine Acquires SemBeth and SMOE to Expand and Grow Its Rig Building and Offshore Engineering Business

The Board of Directors of SembCorp Marine Ltd (the “Company”) wishes to announce that it has signed two conditional sale and purchase agreements comprising the acquisitions of SemBeth and SMOE (the “Combined Acquisition”) for S$183.73 million to expand and grow its rig building and offshore engineering business.

The first sale and purchase agreement (the “SemBeth Acquisition”) is signed between the Company’s wholly owned subsidiary, Sembawang Shipyard Pte Ltd (“SSPL”) and Sembawang Corporation Limited (“SCL”) to acquire SCL’s entire equity interest in Sembawang Bethlehem Pte Ltd (“SemBeth”) for S$128.73 million.This comprises a cash consideration of approximately S$11.75 million and the assumption of a net loan amount of approximately S$116.98 million owed by SemBeth to SembCorp Financial Services Pte Ltd. The acquisition of SemBeth whose assets include the 86 hectares of 22-year leasehold land, workshops, quays and docks located along Admiralty Road East and Admiralty Road West is based on independent valuation by CB Richard Ellis (Pte) Ltd as at 30 April 2006.

The second sale and purchase agreement (the “SMOE Acquisition”) involves the signing of an agreement between the Company and SembCorp Utilities Pte Ltd (“SCU”) to acquire SCU’s entire equity interest in SMOE Pte Ltd (“SMOE”) for S$55 million. The consideration for the SMOE Acquisition was determined by taking into account, amongst other factors, the net appraised value of SMOE valued by Sallmanns (Far East) Limited as at 10 April 2006.

The total amount for the Combined Acquisition is summarised as follows:

 Purchase
consideration
Valuation/
*NAV
Premium/
(Discount)
**NTAPremium
(S$ million)(S$ million)(S$ million)(%)(S$ million)(%)
SemBeth
Acquisition
(1)128.7(2)125.0 3.73.0NANA
SMOE
Acquisition
55.065.6(10.6)(16.2)46.019.6
Total183.7190.6(6.9)( 3.6) 

 

* NAVNet Appraised Value
** NTANet Tangible Asset
(1)Comprise SemBeth land & assets valued at S$125.0 million and stamp duty of approximately S$3.7 million
(2)Based on independent valuation of the SemBeth land and land-based assets
NA Not Applicable

 

The total amount of S$183.73 million for the Combined Acquisition is based on a willing buyer and willing seller basis and will be funded from the Company’s and SSPL’s own internal funds and bank borrowings.

The acquisition of SemBeth and SMOE is in line with SembCorp Marine’s strategy to expand and grow its rig building and offshore engineering business as well as to expand its traditional core business of ship repair/upgrades, shipbuilding and ship conversion. SemBeth, a company incorporated in May 1988 to take over the rig and shipbuilding activities of the Singapore subsidiary of Bethlehem Steel Corporation of the USA was a rig building yard operational in the 1970s to 1980s. The acquisition of SemBeth and the 86 hectares of SemBeth land, workshops, quays and docks by the Company’s subsidiary SSPL will effectively allow SembCorp Marine to own and reorganise the SemBeth land for optimal utilisation to expand and grow its rig building and offshore engineering business. It will also allow the Company the flexibility to plan, invest and execute infrastructure to meet new business requirements and market demands and to provide a cushion from rental fluctuations. It is estimated that S$130 million net total rental savings based on projected discounted cash flows can be derived over the next 22 years based on projected annual rental of land and land-based assets.

SMOE which controls the three subsidiaries of SMOE Indonesia (100%), PT SMOE (90%) (which is held as a stake through SMOE Indonesia) and SCE Pte Ltd (51%), is a recognised leader in the engineering and construction of offshore platforms and floating facilities for the global oil and gas industry.

SMOE owns two fabrication facilities, one located within SemBeth land and the other within the Kabil Industrial Zone on the eastern shore of Batam Island, Indonesia comprising 30 hectares of fabrication facility and 275 metres waterfront land. The acquisition of SMOE by the Company will strengthen SembCorp Marine Group’s position as a leading player in the offshore oil and gas sector, capitalising on SMOE’s fabrication facilities and deriving cost savings by capitalising on the strategic value of land and positive synergies between SMOE and the SembCorp Marine Group. This is expected to yield an estimated annual cost savings in the region of S$5 million for the SembCorp Marine Group.

Mr Tan Kwi Kin, Group President and CEO of SembCorp Marine said “The acquisitions of SemBeth and SMOE would further enhance our capabilities and capacity to expand and grow our rig building and offshore engineering business. With the availability of the SemBeth land and SMOE’s fabrication facilities in Singapore and Batam, we would be able to maximise our capacity to take on more rig building and offshore engineering projects. The timely acquisition of SMOE’s topside capabilities will also position us to grow and expand our capabilities and capacity for the expected growth in the offshore production market.”

SCL and SCU are companies incorporated in Singapore and they are both wholly owned subsidiaries of SembCorp Industries Ltd (“SCI”). SCI owns approximately 62 per cent of the issued share capital of SembCorp Marine Ltd. Accordingly, both SCL and SCU are interested persons as defined in Chapter 9 of the Singapore Exchange Securities Trading Limited (the “SGX-ST”) Listing
Manual and the Combined Acquisition is an interested person transaction.

As the total consideration represents 17.3 per cent of the Company’s consolidated audited net tangible assets as at 31 December 2005 of S$1.062 billion, shareholders’ approval is required to be obtained under Rule 906 (1) (a) of the SGX-ST Listing Manual since the total consideration will exceed the 5 per cent threshold.

An independent financial adviser, Stirling Coleman Capital Ltd has been appointed to advise the directors who are considered to be independent directors for purposes of the combined acquisition as to whether the transactions are on normal commercial terms and are not prejudicial to the interests of the Company and its minority shareholders.

The Combined Acquisition is expected to be earnings accretive. However, it is not expected to have a significant impact on the earnings per share and net tangible assets per share of SembCorp Marine Ltd for the financial year ending 31 December 2006.

Other transactions of the Company with interested persons are disclosed in the 1st quarter 2006 financial results released on 3 May 2006.

Mr Goh Geok Ling is a director of both the Company and SCI. Mr Tang Kin Fei is a director of the Company, as well as SCI and SCU. Accordingly, Mr Tang Kin Fei and Mr Goh Geok Ling will abstain from making any recommendation on the Combined Acquisition at an extraordinary general meeting (“EGM”) to be convened to consider and approve the Combined Acquisition.

None of the Directors and substantial shareholders of the Company has any interest, direct or indirect, in the Combined Acquisition, save in respect of their shareholdings (if any) in the Company.

SCI which wholly owns SCU and SCL is deemed to be interested in the entire issued share capital of the Company and shall abstain from voting at the EGM in respect of the Ordinary Resolution relating to the Combined Acquisition.

Temasek Holdings (Private) Limited, which is deemed to be interested in the entire issued share capital of SCI as well as the balance of 1.943 million shares held by its other subsidiaries shall abstain from voting at the EGM in respect of the Ordinary Resolution relating to the Combined Acquisition.

SCI, Temasek and their respective associates should not accept nominations as proxy unless Shareholders appointing them as proxies give specific instructions in the relevant proxy forms on the manner with which they wish their votes to be cast for the Ordinary Resolution relating to the Combined Acquisition.

As the Combined Acquisition requires the approval of shareholders, an EGM will be convened to seek shareholders’ approval for the two transactions and a circular containing details of the transactions and enclosing the notice of EGM in connection therewith will be dispatched to shareholders in due course.

For media & analysts enquiries, please contact:

Judy Han (Ms)
Senior Vice President
Investor Relations & Communications
Tel No : (65) 6262 7203
Fax No : (65) 6261 0738
Email : mailto:judy@sembcorpmarine.com.sg


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