Keppel shares surge after Temasek makes partial bid

Keppel Corp.’s shares surged on Tuesday in high volume after Singapore state-owned investment company Temasek launched a S$7.35 a share bid to increase its stake in the property and rig building conglomerate.

Shares of Keppel jumped 15.58 percent to S$6.75 by 9:35 A.M. SGT, off an earlier high of S$6.84, but still below the offering price. Volume traded was 14.62 million shares, compared with the 30-day average of 3.01 million, according to Bloomberg data.

Margaret Yang Yan, a market analyst at CMC, said Tuesday the stock’s discount to the offer likely reflected the uncertainties over whether the deal would proceed, pointing to the pre-conditions for the offer.

Temasek said Monday it is making a bid to increase its stake in Keppel to 51 percent in a more than S$4 billion deal. The deal is conditional upon Temasek receiving enough acceptances to result in it having a 51 percent stake and upon the approval of independent shareholders as well as upon regulators’ approval, the filing said. The offer is also conditional upon Keppel’s financial performance not deteriorating materially in the interim.

Keppel’s earnings disappointed some analysts. Last week, Keppel reported its third quarter net profit dropped 30 percent on-year to S$159 million, mainly on year-ago gains from divesting a commercial development in Beijing and higher net interest expense.

Daiwa said in a note Monday the offer price was “attractive,” but added that the deal would take several months to complete, pending regulatory approval.

The partial offer continued to bolster shares of Sembcorp Marine as well amid continued speculation Temasek may push a merger with Keppel’s offshore and marine business.

Daiwa said that option was viable, if properly executed, adding it valued Keppel’s offshore and marine business at S$2.6 billion, compared with SembMarine’s market capitalization of S$2.8 billion. Temasek has told Shenton Wire it won’t comment on market speculation.

The investment bank also pointed to Keppel’s property business, which could be divested, potentially to CapitaLand, noting Keppel Land’s S$6 billion equity value is similar to Ascendas’ in CapitaLand’s recently closed deal to acquire Ascendas-Singbridge.

“Questions would be whether Capitaland has the appetite for more exposure to growth areas like China and Vietnam from a potential deal,” Daiwa said.

Shares of SembMarine were up 0.75 percent at S$1.35 at 9:43 A.M. SGT, extending a more than 12 percent rise Monday, while Sembcorp Industries slipped 0.87 percent to S$2.27 after rising more than 10 percent Monday.

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