It said on Thursday the exit from oil & gas would begin with the proposal for the “distribution in specie” of all its shares in UMW Oil & Gas Corporation Bhd (UMW O-G) to all entitled UMW shareholders by the second quarter of 2017.
UMW explained the decision to exit the O&G was to enable it to focus on the better long-term growth potential.
“Concurrently, UMW O-G is also proposing to lead the oil & gas industry consolidation,” it said.
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Following this exercise, shareholders will now own shares in two listed entities, namely UMW and UMW O-G.
“This will provide an opportunity for shareholders to manage their investment exposure and rebalance their portfolio independent of each other and according to their individual investment objectives,” it said.
This distribution exercise will be followed by a progressive exit of non-listed oil & gas assets held by UMW, a process that started five years ago.
“In pursuing this, for the other non-listed oil & gas assets, UMW may have to impair such investments, the details of which are being assessed as part of the annual audit impairment testing exercise.
“At this juncture, the quantum of the potential impairment has yet to be determined,” it said.
UMW said the proposed distribution would be via a proposed bonus issue and proposed redemption. This would see it utilising the company’s share premium account as opposed to its retained earnings, which may be impacted by the impairment exercise.
The corporate exercise would enable UMW to focus on these core areas and allow for a more efficient employment of resources to these capital intensive, growth businesses. The move would also enable it to strengthen its financial position.
UMW president and group CEO Badrul Feisal Abdul Rahim, said: “UMW Holdings will focus on its core businesses to create and unlock value for shareholders.
“A strategic exit from oil & gas will allow the company to strengthen its financial position and reallocate its resources towards investments that we believe have the best potential for growth.
“In doing so, we will streamline the business and capture stronger returns by investing in areas where we believe we are market-leaders, or can become the leaders,” he said.
“Along the way, we expect to incur impairments. Notwithstanding that, the long-term effect of this exercise will be a strengthened balance sheet, reduced exposure to debt, more efficient operations and a stronger company delivering better value to our shareholders.”
Badrul Feisal said UMW’s long-term strategic goals for the company include enhancing returns from its automotive division, expanding further into high value manufacturing and engineering, and increasing the product range and market presence for its equipment division.