Proposed merger is 'bailout':
analyst claims
From an Agence France Presse report.
June 1, 1998.
AN analyst with a foreign brokerage said the proposed merger between
the government-linked Singapore Technologies Industrial Corp. Ltd. (STIC)
and Sembawang Corp Ltd represented little more than a bailout for debt-laden
Sembawang, adding that it was not the first time the government had effectively
stepped in to help such companies.
The two companies announced Monday (Jun 1) that they will merge to form a major Southeast Asian industrial group.
The success of SembCorp Industries will largely depend on STIC's ability to bring the two companies together in its four areas of operation, the analyst said.
"At this point, you have got to make a judgement as to whether STIC can restructure the group," he said.
The new company, to be called SembCorp Industries Ltd, will focus on four business areas: infrastructure, marine engineering, information technology and lifestyle, company officials said.
The merger is expected to be completed by September after regulatory approval. The new company will have a work force of over 16,700 people.
A joint statement said that with a combined order book of 2.4 billion Singapore dollars (1.4 billion US), the new company will have "the largest civil and building construction business" in Southeast Asia.
SembCorp Industries will operate five industrial parks across Asia as well as the largest marine repair yard in the region with a capacity of 1.8 million deadweight tonnes (DWT), they said. It will also control nine hotels in Asia and a pool of 1700 sofware engineers for its information technology business.
On a pro-forma basis, SembCorp Industries would have had a net profit of 92.4 million dollars on revenue of 3.3 billion dollars in 1997, with net assets at about 6.4 billion dollars, the statement said.
After the merger, STIC and Sembawang Corp. will be delisted and will become operating units of SembCorp Industries, which will be listed on the Stock Exchange of Singapore, they said.
State investment arm Temasek Holdings and Singapore Technologies Pte. Ltd. will together hold 59.11 percent of the enlarged share capital of SembCorp, with the public holding the remaining 40.89 percent.
Trading in STIC and Sembawang and related shares was suspended prior to Monday's merger announcement. At Friday's close, STIC shares were at 1.66 dollars, while Sembawang's were at 3.08 dollars.
Existing STIC shareholders will receive 1475.63105 SembCorp Industries shares for every 1000 shares held, while Sembawang shareholders will get 2543.10882 SembCorp shares for every 1000 shares held, the two companies said.
Wong Kok Siew, currently STIC chairman and deputy chairman of Sembawang, will be the president and chief executive of SembCorp Industries.
Tay Chiew Soon, STIC president and chief executive, will be managing director and deputy chief executive.
Sembawang chairman Philip Yeo, who heads the government's investment-promoting Economic Development Board, will become chairman of the merged entity.
"Both STIC and Sembawang have complementary strengths. Where there are overlaps, the resources will be combined and rationalised. As a result, we will be able to enjoy economies of scale and improved efficiency," Tay said.
"Together as one, we will have the resources and financial strength to compete for larger projects. The combination of our core competencies can also lead to greater synergy," he added.
Wong said: "Individually, while both companies are profitable, there is a limit to their growth potential given their current size. In deciding to merge, both companies have significantly increased their chances of becoming a leading Asian corporation sooner rather than later."