Keppel shareholders should 'hope for the best, prepare for the worst' on Temasek's offer

"DEAL or no deal?" has been trending among investors since Keppel Corp's record quarterly loss cast a cloud over Temasek Holdings' bid for the conglomerate.

Keppel posted a staggering S$697 million loss for the three months to June from a net profit of S$153 million a year ago, led by huge impairments of S$919 million on the back of a gloomy offshore and marine backdrop.

With that, it has breached a key metric for Temasek's pre-conditional S$4 billion partial offer for Keppel shares at S$7.35 per share. (In mid-June, when the market had mostly chosen to dismiss the impairment overhang, this writer had forewarned that such looming risks could cloud the deal's fate).

This pre-condition falls under the deal's Material Adverse Change (MAC) clause, whereby Keppel's profit after tax (PAT) must not fall by more than 20 per cent or below S$557 million over the cumulative four quarters from the third quarter ended September 2019. Given the latest showing, Keppel's cumulative PAT for the 12 months up to and including end-June 2020 stood…

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