Singapore’s Keppel Corporation and Sembcorp Marine are reportedly set to commence discussions on a possible merger of their offshore and marine businesses.

Both companies have issued trading halts on the stock exchange as they prepare to make announcements.

Reuters reported the boards of both Temasek-backed companies are meeting to begin talks that could take many months and ultimately result in Keppel Corp hiving off its offshore and marine unit and combining it with Sembcorp Marine, citing two sources familiar with the matter.

Keppel and Sembcorp Marine officials have yet to reply to enquiries made by Splash.

One of the world’s largest offshore oil rig builders, Keppel, announced in January it was exiting the business to focus on the renewables and gas solutions sector.

Sembcorp Marine has also been looking to further diversify its business portfolio from drilling-focused activities after sinking deeper into the red last year due to lower activity and project stoppages and delays caused by the pandemic.

Merger speculation about Singapore’s top two yards has been around for many years. Both players have a network of shipyards in Singapore and overseas, including in Brazil, and employ thousands of workers.

As a high-cost environment, Singapore authorities have been well aware of the need for greater economies of scale for its two yard champions to remain competitive with cheaper Asian rivals.