The proposed merger of Keppel Corp’s offshore and marine unit, as well as Sembcorp Marine, has drawn the attention of the Competition and Consumer Commission of Singapore, which is launching a consultation exercise to seek public’s views on this deal.
Both companies, for years, are in the similar business of building oil rigs and related vessels for the oil and gas industry.
Following the slump in oil prices, the market for these products declined substantially, although a more recent pick up in oil prices have helped both Keppel O&M as well as Sembmarine to announce a slew of new orders in recent months.
The proposed merger between the two entities, which share the same ultimately controlling shareholder in the form of Temasek Holdings, was announced on April 27.
In a Aug 2 statement, the CCCS said it has accepted a joint notification by the two entities on July 29 for a decision on the proposed deal.
“CCCS is now assessing whether the proposed combination, if carried into effect, would infringe section 54 of the Competition Act 2004, which prohibits mergers that have resulted, or may be expected to result, in a substantial lessening of competition within any market in Singapore,” says CCCS.
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CCCS notes that the two parties have maintained that the deal will not lead to this “substantial lessening of competition” within this market in Singapore because of the “competitive tendering processes” for the purchase and repairs of commercial vessels, strong competition from existing global players or new entrants, and presence of large and sophisticated buyers with considerable buyer power.
Keppel O&M and Sembmarine have also pointed out how the proposed deal can help reap multiple synergies which would allow the combined entity to expand its suite of technological capabilities, carry out a wider scope of work, generate greater economies of scale and develop more rigorous project execution capabilities.
CCCS is inviting public feedback to be submitted by Aug 15.
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Keppel Corp, the parent company of Keppel Offshore and Marine, closed on Aug 2 at $6.96, unchanged for the day but up 34.62% year to date.
Sembmarine, meanwhile, closed at 11 cents, up 1.82% for the day, and up 40% year to date.
