$3 billion deal for rig-builder Keppel canceled after quarterly loss

SINGAPORE (Bloomberg) - Kyanite Investment Holdings, a unit of Singapore state-backed investor Temasek Holdings Pte, scrapped its bid to take control of Keppel Corp. after the oil-rig builder posted a second-quarter loss.

Kyanite invoked a clause allowing it to withdraw the offer after the quarterly loss failed to meet pre-conditions of the bid, it said in a statement Monday. Kyanite in October offered S$4 billion ($2.9 billion) for an additional 30.6% stake in Keppel. Temasek already owns one-fifth of the conglomerate, whose businesses include offshore and marine infrastructure and property development.

There were warning signs that the deal may not go through when Keppel reported a net loss of S$697.6 million for the three months ended June 30. That was Keppel’s first quarterly loss in more than two years as Singapore’s partial lockdown slowed production at its yards, with impairment losses at an associated company further denting its bottom line. Keppel shares have tumbled 20% this year.

Under the bid conditions, Keppel needed to have a net asset value above S$10.3 billion and cumulative net income after tax but before non-controlling interests of more than S$556.9 million. Both were cited in June as key benchmarks by Morgan Stanley, Temasek’s adviser on the deal. However, Keppel’s quarterly loss meant it didn’t satisfy a pre-condition related to after-tax net income.