* Keppel posts Q2 net loss of S$697 mln vs year-prior profit
* Loss breaches Temasek’s terms of conditional offer
* Keppel impacted by impairments in offshore & marine unit
* Bid unlikely to proceed unless pre-conditions waived -analyst (Adds analyst comment in the sixth paragraph)
By Aradhana Aravindan and Anshuman Daga
SINGAPORE, July 31 (Reuters) - Singaporean conglomerate Keppel Corp swung to a big second-quarter loss on Thursday that breaches a threshold in state investor Temasek Holdings’ $3 billion conditional offer to buy control of the company.
Last October, Temasek offered to increase its one-fifth stake in Keppel to 51%, raising expectations of consolidation in the domestic rig building sector.
Temasek declined to comment on Keppel’s results and the impact on its conditional offer.
Keppel’s CEO Loh Chin Hua said: “We believe that the 20% threshold in the MAC (material adverse change) clause in respect of net profit after tax has been crossed.”
The CEO said this meant that the pre-condition in Temasek’s offer had not been satisfied but said Keppel was unable to comment on the offer or Temasek’s stance.
“Following the impairments, Keppel’s trailing 12-month results missed the S$557 million profit after tax target and hence breached the profit after tax MAC clause for Temasek’s partial offer. As such, the transaction is unlikely to proceed unless the pre-conditions are waived (at Temasek’s discretion),” Citigroup analysts said in a report.
Keppel reported a net loss of S$697 million for the quarter to June versus a net profit of S$153 million a year earlier. That marked its biggest quarterly loss in at least 15 years, Refinitiv data showed.
Keppel, whose businesses range from property development to rig-building, incurred impairments of S$919 million, mostly in its offshore and marine business. Excluding impairments, net profit would have been up 45% to S$222 million for the quarter.
“Given the continuing impact of COVID-19, 2H 2020 will probably remain very challenging,” Loh said.
Keppel’s shares closed 3.6% lower at S$5.40 ahead of the results. They have fallen 20% this year, nearly back to the same levels when Temasek made its conditional bid of S$7.35 per share. (Reporting by Aradhana Aravindan and Anshuman Daga; Editing by Jane Merriman and Christopher Cushing)