UMW Holdings Berhad announces plans to refocus on core businesses of automotive, equipment and manufacturing & engineering to create value for shareholders
Company plans strategic exit from oil & gas sector via ‘distribution in specie’ of UMW Oil & Gas Corporation Berhad shares to entitled shareholders, followed by progressive exit from non-listed oil & gas assets
KUALA LUMPUR, 19 January 2017– UMW Holdings Berhad (UMWH) today announced it is refocusing on its core businesses of automotive, equipment and manufacturing & engineering. The announcement follows the commencement of a planned strategic exit from the oil & gas sector to allow the company to enhance its operations in areas where it sees better long-term growth potential. Concurrently, UMW Oil & Gas Corporation Berhad (UMWOG) is also proposing to lead the oil & gas industry consolidation. The exit from oil & gas begins with the proposal for the ‘distribution in specie’ of all its shares in UMWOG to all entitled shareholders of UMWH. This distribution exercise will be followed by a progressive exit of non-listed oil & gas assets held by UMWH, a process that commenced five years ago.
In pursuing this, for the other non-listed oil & gas assets, UMWH 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. UMWH has chosen to undertake the proposed distribution through the Proposed Bonus Issue and Proposed Redemption, which utilises the Company’s share premium account as opposed to its retained earnings, which may be impacted by the impairment exercise. Following this exercise, shareholders will now own shares in two listed entities, namely UMWH and UMWOG. 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.
The process of refocusing on the company’s core businesses will position UMWH for leadership in these core areas and allow for a more efficient employment of resources to these capital intensive, growth businesses. In addition, the go-forward business will gain added strength to its financial position.
President and Group Chief Executive Officer of UMW Holdings Berhad, Badrul Feisal bin 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.
“To achieve these goals, we are distributing our shares in UMWOG to UMW Holdings investors and pursuing our progressive exit strategy from all our non-listed oil & gas assets with a view to eventually exiting the business altogether.” “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.” The proposed distribution of UMWOG shares is expected to be completed by the second quarter of 2017.
Badrul Feisal bin Abdul Rahim added: “Looking ahead, our long-term strategic goals for the company include enhancing returns from our automotive division, expanding further into high value manufacturing and engineering, and increasing our product range and market presence for our equipment division.”
