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Product cover image for Sembcorp Marine: Recapitalization and Demerger During COVID-19

Sembcorp Marine: Recapitalization and Demerger During COVID-19

Allaudeen Hameed, Ruth S.K. Tan, Weina Zhang

Product #:W25131
Supplier:Ivey/NUS
Discipline:Finance
Setting:Southeast Asia and Oceania, 2020
Details:Case (PDF) • 13 pages • 2021-12-02

Subjects:

Cash flowCorporate financeFinance and investing

Industries:

Transportation and distribution

Geography:

Asia
Your Price:$9.71

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On June 8, 2020, Sembcorp Marine Ltd. (SCM) announced a S$2.1 billion recapitalization plan to be followed by a demerger from Sembcorp Industries Ltd (SCI). SCM’s business had been significantly affected by the COVID-19 pandemic and a collapse in oil prices, resulting in a critical need for liquidity. The recapitalization would be done through a rights issue. The demerger would be conducted through a subsequent share distribution of SCI’s stake in the recapitalized SCM to SCI’s shareholders.

The case seeks to provide a reasonable valuation of SCM based on its past financial performance and other relevant market information. It also analyzes the rationale of the demerger and the impact of the demerger on shareholders of SCM and SCI.

Learning Objectives

This case can be used in an advanced undergraduate- or graduate- level course on corporate finance or financial management. It presents an opportunity for students to study the sources of funding during a pandemic, conduct a valuation exercise, and explore a unique demerger of two listed companies. After working through the case and assignment questions, students will be able to do the following:
  • Analyze the rationale of the recapitalization and demerger.
  • Value the shares using the discounted cash flow model and relative valuation.
  • Determine how shareholders should respond to the rights issue.
  • Analyze the impact of the announcement on the value of both firms.
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Case Study: Sembcorp Marine: Recapitalization and Demerger During COVID-19 (English version) | Ivey Publishing