Automotive group to merge its O&G unit with Icon and make impairments on residual assets
KUALA LUMPUR: UMW Holdings Bhd, a conglomerate with interest primarily in automotive and heavy equipment, will exit the oil and gas (O&G) business through a series of corporate exercises.
It will also make impairments for its non-O&G assets as part of a measure to completely exit the sector.
The amount to be impaired will be disclosed in its final-quarter results for 2016 that will be announced at end-February.
“In pursuing the divestment of the non-listed O&G assets, UMW will undertake an impairment. The quantum has yet to be determined,” said UMW president and group chief executive officer Badrul Feisal Abdul Rahim at a press conference.
UMW’s exit from the O&G sector is through a series of corporate exercises. It includes a dividend in specie and a capital injection estimated at RM750mil by its major shareholder Permodalan Nasional Bhd (PNB) into a new enlarged O&G outfit that will have Ekuiti Nasional Bhd (Ekuinas) as a shareholder.
Under the exercise, UMW will distribute its 55.7% stake in UMW Oil And Gas Corp Bhd (UMW-OG) to shareholders.
Following that, UMW-OG will take over Ekuinas’ 42.3% stake in Icon Offshore Bhd, triggering a mandatory general offer.
UMW-OG will offer Icon shareholders an option of cash of 50 sen each share or one UMW-OG share valued at 80 sen.
Icon, which is the largest offshore support vessel provider in Malaysia, had an average fleet utilisation rate of 59.1% as of the third quarter of financial year 2016.
The enlarged UMW-OG unit will also acquire Orkim Sdn Bhd, a company that owns and operates clean petroleum products, for RM472.73mil from Ekuinas in cash.
As of December last year, Orkim had an outstanding order book of RM637mil, with contract tenures up to 2021.
The enlarged UMW-OG will undertake a rights issue amounting to RM1.8bil, of which part of the proceeds would go towards the purchase of Orkim.
PNB will subscribe for its portion of the rights issue amounting to RM750mil subject to board approval.
As for Ekuinas, it will also subscribe to its portion amounting to RM550mil.
Ekuinas chief executive Syed Yasir Arafat Syed Abdul Kadir said that the investment fund was effectively putting the money from the sale of Orkim back into the enlarged O&G outfit.
In a move that indicates PNB’s more hands-on approach in UMW-OG, the fund’s president and group CEO Datuk Abdul Rahman Ahmad has been appointed as deputy chairman of the O&G company.
With its exit from the O&G sector, UMW aims to redefine its corporate strategy, streamline its business model and reallocate its resources.
Badrul highlighted that the conglomerate was steering out of the O&G field to focus primarily on its three core businesses.
“The total exit from UMW-OG will allow the group to focus on our three main businesses, namely, the manufacturing and engineering, automotive and equipment sectors.
“Over the last five years, the group has been gradually exiting from approximately 10 non-listed O&G assets,” said Badrul, adding that the conglomerate planned to dispose of its stake in 12 more assets, moving forward.
In 2017 alone, UMW foresees divestments in about six or seven O&G assets.
With the completion of the corporate exercises, Ekuinas’ interest in the O&G sector will be entirely narrowed to its ownership of UMW-OG.
Upon the successful completion of the corporate exercise, UMW-OG aims to be an integrated service provider in the O&G sector, catering to industrial needs, right from the exploration to the downstream segments.
“The merger of the three companies is also timely in answering Petroliam Nasional Bhd’s call for consolidation of the Malaysian O&G industry,” said UMW-OG president Rohaizad Darus.
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