SINGAPORE – Temasek Holdings has not yet decided whether to invoke a material adverse change (MAC) clause in its $4.1 billion conditional offer for Keppel Corp, adviser Morgan Stanley said on Saturday (Aug 1).
Keppel fell to a $697.6 million second-quarter net loss last Thursday, breaching a threshold in state investor Temasek’s offer to buy control of the company.
“At this stage, the offeror has not made a decision whether to invoke the MAC pre-condition based on the 2Q2020 results,” Morgan Stanley said in a regulatory filing issued on behalf of Temasek.
“If the MAC pre-condition is invoked by the offeror, the pre-conditional partial offer will be withdrawn,” it said, adding that a decision on the matter would be disclosed no later than Aug 31.
MAC clauses can be invoked to end or renegotiate deals, particularly if events occur that are detrimental to the target company.
Last October, Temasek, which already owns about one-fifth of Keppel, offered to buy an additional 30.6 per cent stake at $7.35 per share in cash.
Keppel chief executive officer Loh Chin Hua said at last Thursday’s results briefing: “We believe that the 20 per cent threshold in the MAC clause in respect of net profit after tax has been crossed.”
The CEO said that this meant the pre-condition in Temasek’s offer had not been satisfied as of Thursday.
Mr Loh said the company was unable to comment on the offer or the action that Temasek could take.
Still, the deal has a long-stop date of Oct 21, meaning Keppel could make up any shortfall in its third-quarter results, while Temasek also has the right to waive its pre-conditions.
Keppel’s loss came on the back of worse-than-expected provisions of $919 million during the period, mostly related to its offshore and marine business.
Mr Loh pointed out that the impairments were non-cash items and would not hamper Keppel’s ability to secure funding in an uncertain, pandemic-hit environment. He also said the group’s underlying business, apart from Keppel Offshore & Marine, remains strong.