Singapore conglomerate Keppel Corp and smaller rival Sembcorp Marine have agreed to explore a potential combination of Sembcorp with Keppel‘s offshore and marine (O&M) business.
“The objective of these discussions is to create a stronger combined entity and sustainable value over the long term for Keppel O&M and Sembcorp Marine and their respective stakeholders, in response to dramatic changes in the global offshore and marine engineering and energy sectors,” the companies said in a joint statement on Thursday.
Earlier, Reuters cited sources as saying the companies, which both count Singapore state investor Temasek Holdings as their largest shareholder, were set to begin talks to explore combining their O&M businesses, which have been hit by years of oversupply and sustained weakness in oil prices.
Keppel is one of the world’s largest offshore oil rig builders.
Sembcorp also announced a S$1.5 billion ($1.12 billion) fully committed rights issue.
The statement said Keppel and Sembcorp will “undertake mutual due diligence and discuss the terms of the potential combination, which is expected to take several months.”