Sembcorp Marine Increases Stake in Cosco Shipyard

SembCorp Marine has signed a conditional sale and purchase agreement with Seletar Investments Pte Ltd (SIPL), a wholly-owned subsidiary of Temasek Holdings (Private) Limited (Temasek) to acquire its entire equity interest in Cosco Corporation (Singapore) Limited (Cosco Corporation), comprising 110,400,000 shares for a total consideration of $120,336,000 at $1.09 per share.

The net consideration at $120,336,000 for the 110,400,000 shares is based on a willing buyer and willing seller basis and will be funded from SembCorp Marine's own internal resources.

SembCorp Marine currently owns 70,000,000 shares in Cosco Corporation. With the acquisition, SembCorp Marine's shareholding in Cosco Corporation will increase from 70,000,000 (or 3.17 per cent of issued share capital of Cosco Corporation) to 180,400,000 (or 8.17 per cent of issued share capital of Cosco Corporation).

Both SembCorp Marine and Cosco Corporation are strategic partners with equity interests in the Cosco Shipyard Group (CSG) in China. SembCorp Marine holds a 30 percent equity stake in CSG while Cosco Corporation holds 51 percent of CSG. Cosco Corporation also has a further direct equity interest of 50 percent in Cosco Nantong and 39 percent in Cosco Dalian.

The investment in Cosco Corporation is in line with SembCorp Marine's strategy to grow its marine and offshore business in Singapore and China. The Cosco Shipyard Group is a leading ship repair and conversion group in China. It owns five major shipyards that are strategically located in the key coastal cities stretching from Dalian in the north, Nantong, Shanghai and Zhoushan in the centre, to Guangzhou in the south. These shipyards provide ship owners with an effective network of marine engineering services across the entire length of China's coast.

Mr. Tan Kwi Kin, Group President and CEO of SembCorp Marine said "Our strategic tie-up with Cosco Corporation and the Cosco Shipyard Group would enable us to enhance and increase our capacity to take on offshore projects. We are leveraging on the facilities and strengths of our partners. It will be a win-win situation for all parties."

SIPL is a company incorporated in Singapore and is a wholly-owned subsidiary of Temasek Holdings Pte Ltd. Temasek is the ultimate holding company of SembCorp Industries Limited, the controlling shareholder of the Company. SembCorp Industries Limited has a shareholding interest of 61.96 per cent in the issued share capital of the Company, which together with Temasek's direct shareholding interest; Temasek is deemed to be interested in 62.09 percent of the issued share capital of the Company as of March 23, 2006. Accordingly, SIPL is an interested person as defined in Chapter 9 of the Singapore Exchange Securities Trading Limited (the "SGX-ST) Listing Manual and the Proposed Acquisition is an interested person transaction.

As the Purchase Price represents 11.3 percent of the Company's latest consolidated audited net tangible assets as of December 31, 2005 of S$1.062 billion, shareholders' approval is required to be obtained under Rule 906(1)(a) of the SGX-ST Listing Manual since the Purchase Price will exceed the 5 percent threshold.

The Proposed Acquisition requires the approval of shareholders, an extraordinary general meeting (EGM) will be convened to seek shareholders' approval for the Proposed Acquisition and a circular containing details of the transaction and enclosing the notice of EGM in connection therewith will be dispatched to Shareholders in due course.

An independent financial adviser will be appointed to the directors who are considered to be independent directors for purposes of the Proposed Acquisition to advise the independent directors as to whether the Proposed Acquisition is on normal commercial terms and is not prejudicial to the interests of the Company and its minority shareholders.

The Proposed Acquisition is not expected to have a significant impact on the earnings per share and net tangible assets per share of SembCorp Marine for the financial year ending December 31, 2006.


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