On Aug 10, Temasek Holdings announced it has decided that it will invoke the material adverse change (MAC) pre-condition, and accordingly, the Partial Offer will not proceed. The Securities Industry Council of Singapore has confirmed that it has no objection to the Offeror withdrawing the Partial Offer by invoking the MAC pre-condition.

On July 30, Keppel Corp announced that its profit after tax (PAT) in 2Q2020 was a negative $698.8 million, and the cumulative PAT for the latest 12 month period is a negative $164.7 million. In October last year, Temasek Holdings announced a partial offer for Keppel Corp at $7.35 per share in order to raise its stake from 20% to 51%, under certain pre-conditions. At this price, Temasek would be paying $4.08 billion for its additional 30.55% stake, or 1.28x  Keppel's1H2020 NAV of $5.70. Among the MAC pre-conditions is for PAT for a 12 month period to be no less than $556.9 million.

If the MAC pre-condition is to be assessed on 2Q2020 results, the MAC pre-condition would not be satisfied, a recent Keppel Corp announcement says.  

On Aug 1, Morgan Stanley Asia, on behalf of Kyanite Investment Holdings, an indirect wholly-owned subsidiary of Temasek Holdings, announced that Temasek Holdings would disclose as soon as it makes a decision, and no later than Aug 31, if the latter intends to invoke the material adverse change (MAC) clause in its partial pre-conditional offer for Keppel Corp.

CGS-CIMB says in an update: “Without Temasek’s partial offer, there will be no change in Keppel’s business model and its 2030 vision but our hopes of a potential merger between the yards Keppel O&M and Sembcorp Marine (SMM) may not happen so soon.” SMM and Sembcorp Industries (SCI) EGM be held 10am  / 11.30am on Aug 11. 

*We don't think the Keppel deal falling through will affect the Sembcorp proposals. SMM needs the lifeline rights issue and SCI demerging SMM allows both companies to stay focused on their respective businesses," says a DBS Research note.

CGS-CIMB has a sum-of-the-parts valuation of $6.46, and is looking for a 2H2020 recovery including from some asset recycling gains. It sees support at 0.82x NAV, which translates into $4.76. Keppel Corp closed at $5.40 on Aug 7.