UMW Holdings to exit oil & gas business

KUALA LUMPUR: UMW Holdings Bhd is exiting from its oil and gas business amid the low price environment and the conglomerate will refocus on its core businesses of automotive, equipment and manufacturing & engineering.
The demerger of UMW Oil & Gas Corp Bhd (UMW-OG) will be done through the distribution-in-specie of all UMW Holdings’ 55.72% stake in UMW-OG in the form of bonus issue.
Following that, there will be a merger between UMW-OG, Icon Offshore Bhd and Orkim Sdn Bhd, to create an integrated service provider in the oil and gas industry.
Orkim is the owner and operator of the largest clean petroleum product marine transportation vessels in the country.
Under the sale and purchase agreements, UMW-OG will acquire Ekuinas’ indirect stake of 42.3% and 95.5% in Icon Offshore and Orkim for RM248.89 million and RM472 million, respectively.
The acquisition of Icon Offshore will be satisfied via the issuance of new UMW-OG shares at 80 sen per share. UMW-OG will then undertake a mandatory take over of Icon Offshore shares, and its listing status will not be maintained.
Upon completion, Permodalan Nasional Bhd (PNB) will become the largest shareholder of the merged entity with a 40% stake, followed by Ekuinas 12.6%. The consolidation is slated for completion by the third quarter of the year.
UMW-OG is also looking to raise RM1.8 billion via a rights issue exercise with Ekuinas indicating its support of up to RM550 million for the recapitalisation exercise, which will enhance its balance sheet and competitiveness.
Besides the demerger of UMW-OG, UMW Holdings president and group CEO Badrul Feisal Abdul Rahim revealed that there will be progressive sale of its 12 other non-listed oil and gas assets.
“We’ve sold 10 assets in the past. We hope to exit more than six to seven assets this year and to complete the entire disposal next year,” he told a press conference on the major corporate exercise yesterday.
However, UMW Holdings will have to incur an one-off impairment for those assets, which has been booked into its fourth-quarter financials ended Dec 31, 2016. The financial results will be announced by the end of next month.
The quantum of the impairment, he said, has yet to be determined as the details are still being assessed.
Badrul noted the decision to exit the oil and gas business came after the lack of significant recovery in the industry for more than two years.
“From the holding company’s perspective, we have investment with Toyota for a RM1.8 billion plant. It’s really a high capital intensive industry and we have to be selective,” he explained.
Icon Offshore swung to the red registering a net loss of RM2.24 million for nine months ended Sept 30, 2016 versus a net profit of RM12.81 million for the same period a year ago.
UMW-OG, meanwhile, incurred a net loss of RM267.76 million over the same period against a net profit of RM36.82 million a year before.