Temasek unit to decide by end-Aug on material adverse change pre-condition regarding Keppel offer

THE Temasek Holdings unit that last October made a voluntary pre-conditional partial offer for Keppel Corporation will decide by end-August whether to invoke the material adverse change (MAC) pre-condition based on Keppel's second quarter results.

This was conveyed in an announcement over the weekend by Morgan Stanley Asia (Singapore) on behalf of the offeror, Kyanite Investment Holdings, an indirect wholly-owned subsidiary of Temasek.

At this stage, the offeror has not made a decision whether to invoke the MAC pre-condition based on Keppel's results for Q2 FY2020, Morgan Stanley said.

Last Thursday, Keppel posted a record quarterly net loss of S$697.59 million for the three months ended June 30, 2020 - breaching certain conditions for Temasek's S$4 billion pre-conditional partial offer, which would raise its stake in the conglomerate to 51 per cent.

The partial offer is subject to the satisfaction and/or waiver (at Temasek's discretion) of a number of pre-conditions - including there being no MAC in Keppel group's financial performance and condition.

The MAC pre-condition requires, among other things, that the cumulative net profit after tax but before non-controlling interests (PAT) of the group for the 12 months up to and including the end of the financial period in the latest financials to be more than S$556.9 million. This threshold represents a decrease of  20 per cent from the cumulative PAT of the group for the 12 months ended Sept 30, 2019 of S$696 million.

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Keppel's Q2 FY2020 group PAT was negative S$698.8 million; based on this, the group's cumulative PAT for the 12 months up to and including June 30, 2020, is negative S$164.7 million. "Accordingly, if the MAC pre-condition was assessed based on the Q2 2020 results, the MAC pre-condition would not be satisfied," Morgan Stanley said.

"In consultation with the Securities Industry Council of Singapore, the offeror will disclose, as soon as a decision is made and by no later than Aug 31, 2020, if it intends to invoke the MAC pre-condition based on the Q2 2020 results. 

"If the MAC pre-condition is invoked by the offeror, the pre-conditional partial offer will be withdrawn."