Corporate actions are often difficult for retail investors to comprehend because they are a fusion of finance concepts and law, douse in a sea of jargon.
Fret not, it is my job to make it simple for you.
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I received some questions regarding the Sembcorp Marine Mandatory Conditional General Cash Offer and the investors were clueless what to do about it.
So I’m going to do a quick explainer on this.
Sembcorp Marine did a rights issue not long ago, so…
Why a Mandatory Offer now? Are they running out of money?
Relax, Sembcorp Marine is NOT running out of cash. The Offer is made by Startree who owns a stake in Sembcorp Marine, and it is an indirect subsidiary of Temasek – imagine Startree as the grandchild of Temasek.
The money raised via this Offer will go to the pockets of those Sembcorp Marine shareholders who have decided to accept the Offer. No money goes to Sembcorp Marine.
The Offer has to be made because of The Singapore Code on Take-Overs and Mergers (a 209-page of lawspeak to outline the rules about how mergers and acquisitions should be conducted in Singapore).
It stated that mandatory offers are triggered when:
any person who, together with persons acting in concert with him, holds not less than 30% but not more than 50% of the voting rights and such person, or any person acting in concert with him, acquires in any period of 6 months additional shares carrying more than 1% of the voting rights.
Remember the Sembcorp Marine rights issue that was concluded in Sep 2021? Temasek and its related entities have subscribed to 9.3 billion Rights Shares on 22 September 2021 during that exercise. Their collective stake in Sembcorp Marine increased by 4%, from 42.6% to 46.6%. The mandatory offer was triggered because their stake was between 30% and 50% and it was raised by more than 1%.
The intention is to maintain the listing of Sembcorp Marine and it was clearly stated in its Offer document. However, privatisation is still possible depending on the level of acceptance of the Offer and among other considerations.
What are the terms of the Mandatory Conditional General Cash Offer for Sembcorp Marine?
- The Offer price is S$0.08 per Sembcorp Marine share. This is the same price as the rights issue last month.
Assuming you have 1,000 shares, you get $80 cash if you accept the Offer for all the shares you have.
But there’s a condition, the Offeror must get enough acceptances to increase its stake to more than 50% in Sembcorp Marine. Otherwise, your shares will not be purchased even if you have accepted the Offer.
I think the Offer is unlikely to lapse because the Offeror’s stake is at 46.6%, which is very close to attaining the 50% mark. I believe some shareholders would accept.
- The deadline to accept the Offer is on 3 Nov 2021, 5:30pm.
What do you need to do?
You should have received the Offer document or a letter/email from your broker by now.
If your Sembcorp Marine shares are stored in the CDP, you can choose to fill up the form and submit by post or do it online via the SGX Investor Portal. Yes, the latter is the new service from SGX!
If your Sembcorp Marine shares are held in custody by your broker, you will need to follow their instructions. The deadline is usually earlier than the official deadline, so make sure you pay attention to it if you want to accept the Offer.
If you have used CPF or SRS accounts to invest in Sembcorp Marine, you will receive instructions from your agent bank on how to accept the Offer.
If you don’t wish to accept the Offer, you can ignore this altogether 😀
P.S. Chris’ll be sharing how he picks Singapore stocks for dividend income, which allowed him to retire. Join him this week.
Will SembMarine be delisted or stay listed after the offer?
listed unless too many shareholders accept the Offer
Let’s assume that the shareholders accept the offer and Sembcorp marine gets delisted. Then what happens to the shareholders who haven’t accepted the offer?
First, i think it is unlikely it will be delisted.
But if it does…
U will have one last chance to sell at the same price before it delist. Or the offeror can make a compulsory acquisition should they pass the threshold. The last scenario is that you become a shareholder of a private company.
Thanks Alvin. Great analysis and explanation on the matter.
Thanks!
At 8cents per share, the offer is the same level as current market price, so apart from brokerage and other fee there is no advantage to accepting the offer. Once realised through acceptance of this offer, there is no longer the possibility of upside should conditions improved and the shares trade back up towards fair value. so what advantage if any is there for acceptance?
the advantage is that one doesn’t want the shares anymore and this becomes an opportunity to sell.
Hi Alvin, your analysis helps me understand the issue, and the Q&A further clarifies the options. As there is no advantage of acceptance, I would opt to let is lapse and see what will happen to SembCorp shares thereafter. Kevin
I will let it lapse too; i dont expect Temasek will let it sink much lower than 8cents. Possibility of joining up with Keppel, so although may not have dividend for the next 2 yrs, i see some light in the medium term as company is going into green energy.
What happen if I become shareholder of private company like sembcorp marine if I want to sell my share at that time ?
You have to find a buyer on your own and negotiate the price.
Oil price already go up a lot and energy shortage . The rig building business should improve . I think the share price already Rock bottom and shall not sell cheap to big Shareholder. As long as all don’t take up the offer the big shareholder also borpian .