The UEM-Renong Bhd group announced yesterday its long-awaited final restructuring plan, which will see Renong being taken private and the streamlining of core business units under a new company to help the group trim debts.
Renong's listed status would be transferred to a new company, UEM World Bhd, which would have four core activities: engineering and construction, healthcare, environmental services, and property.
Renong will also undertake a capital reduction to halve its share base and proceeds from the sale of equity stakes in several companies and interest waiver will reduce its RM3.6bil SPV (special purpose vehicle) bonds to RM1.9bil.
UEM World would buy several companies from UEM for RM945mil via a share swap of 591 million new shares at RM1.60 each to UEM.
The five-step plan would also see the UEM Group ending up with about 60% of UEM World and Intria Bhd becoming a core engineering and construction company, taking over Projek Penyelenggaraan Lebuhraya Bhd (Propel) which would later be de-listed from the KLSE.
Although the plan is a ''total solution package'' for the entire UEM/Renong group, it really addresses the long-term viability of Renong which, in effect, is threatening the viability of the entire UEM group. The plan is also in line with the government's call to consolidate the construction sector.
“This marks the completion of the restructuring of the UEM-Renong group. We expect to list UEM World on the KLSE by September this year,'' UEM executive vice-president Abdul Wahid Omar told a briefing in Kuala Lumpur yesterday.
He added that each core business would be housed either under a listed or anchor company.
Wahid said the plan involved the creation of a financially stronger company (UEM World) with performing assets, and offered minority shareholders shares in UEM World whose net tangible asset backing per share would improve to 67 sen compared with Renong's six sen.
He added that the completion of the plan would also allow the management to focus on operational, organisational, and business development issues.
The UEM/Renong group also has embarked on a rebranding exercise and is now known as UEM Group instead of UEM/Renong group.
The September deadline for completion of the exercise would mark the second anniversary of the takeover of UEM by Syarikat Danasaham Sdn Bhd, a unit of Khazanah Nasional Bhd.
This is the second complex plan that the group has announced since the government took control of UEM in 2001. The first plan announced in December 2001 outlined the streamlining of operations into six units and divesting stakes in six companies and halving its debts from RM30bil.
According to Wahid, the group has since returned to the black with an operational profit of more than RM700mil and shareholders' funds of RM5.3bil and debts of RM16bil.
He added that the move to restructure would expedite Renong's transformation. Last year Renong was on the verge of falling into the PN4 category and as an immediate measure to prevent Renong's shareholder's funds from being in the deficit, a private placement of 800 million shares to raise RM400mil was undertaken.
Wahid said the restructuring exercise would enhance the group's operational efficiency and financial performance as non-performing assets would be disposed of and profitable companies would be positioned under UEM World to create and add value and enhance earnings per share for shareholders.
He declined to give any profit forecast but as at the end of financial year 2002, the audited and unaudited net profit of all the companies that UEM World would control was about RM150mil.
As part of the plan, UEM would also end up owning stakes in six listed companies: Commerce Asset-Holding Bhd (11.1%), Park May Bhd (44.4%), Faber Bhd (48.4%), Camerlin Bhd (3.2%), and Ho Hup Construction Bhd (32.5%), and Time Engineering Bhd (46.8%).
Based on the five-day weighted average up to Feb 28, the investments were worth RM1.3bil.
These were some of the assets slated for divestment under the 2001 announcement. So far Putra and Crest Petroleum have been sold.
Wahid said although the divestment plan was still ongoing, there was no urgency to hive off assets.
“We will sell these assets at an appropriate time. The sale must be at the right time and (price),'' he said.
Asked why Park May was not restructured, Wahid said it was up to that company's board to do so as UEM's investment, based on Park May's current share price, was only worth RM6mil.
Similarly, stakes in CIMA would not be divested contrary to the earlier plan. Wahid said: “We have put it in UEM World and it is not up for sale.''
On why Ho Hup was not restructured to be part of UEM Builders, Wahid said: “While we may hold a 32% stake in Ho Hup, the company is managed separately by our partners. We do not control Ho Hup.''
On the SPV bonds, he said it was restructured to RM1.9bil, which was a comfortable level and the interest burden was not too great.
Asked if UEM planned to reduce its stake in UEM World, Wahid said: “We are likely to maintain the 60% stake in UEM World. We are comfortable with it.''
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