Keppel shares tumble as Temasek scraps $3 billion bid after conglomerate's loss

SINGAPORE (Reuters) - Shares in Singapore's Keppel Corp KPLM.SI fell 13% on Tuesday after Temasek Holdings abandoned its $3 billion offer for the conglomerate by invoking a material adverse change clause following the company's poor financial results.

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Keppel’s large second-quarter loss that breached a threshold in the state investor’s offer to buy majority control had boosted the risk Temasek would abandon the deal. [L4N2F301B]

“It was a surprise, as my base case was that Temasek would have proceeded, but with a lower offer price,” said KGI Securities analyst Joel Ng.

Shares of Keppel, whose businesses range from property development to rig-building, fell 10.7% after dropping as much as 13% to their lowest in more than four years. The shares, which did not trade on Monday due to a public holiday, were the worst performing on the main stock index .STI.

The stock is down 19% since it flagged a hit to second-quarter profits on July 24.

Expectations had grown that Temasek would lead much-needed consolidation in the rig-building sector after taking majority control of Keppel. The industry has been battered by a long period of low oil prices exacerbated by the coronavirus crisis.

Anticipation of a deal strengthened in June, when Temasek backed a S$2.1 billion rights issue by Sembcorp Marine SCMN.SI, Keppel's smaller competitor.

“The withdrawal will put a spanner in the works - it was widely expected that there would be some alliance between Keppel’s marine business and Sembcorp Marine, with Temasek being the largest mutual shareholder,” said Justin Tang, head of Asian research at United First Partners.

Separately, shareholders of Sembcorp Marine and its parent approved the rights issue. Sembcorp Marine shares rose 1.4%.

Last October, Temasek offered to raise to 51% its stake of a fifth of Keppel.

“We continue to believe in the inherent value of Keppel’s business, and have a strong balance sheet and support from our network of banks to finance the group’s operations and growth initiatives,” Keppel said in a statement late on Monday.

Additional reporting by Aradhana Aravindan; Editing by Clarence Fernandez and Louise Heavens