WHEN news broke last month that UMW Oil & Gas Bhd (UMWOG) would be carved out of UMW Holdings Bhd and be consolidated with entities linked to Ekuiti Nasional Bhd (Ekuinas), many might have wondered if it was the brainchild of Tan Sri Abdul Wahid Omar, recently appointed chairman of Permodalan Nasional Bhd (PNB), which is a majority shareholder in UMW Holdings.

After all, Wahid carries a reputation of being a corporate fix-it man. He was appointed to PNB in the bumiputera fund’s first leadership change in nearly two decades, with a mission to improve the corporate performance of PNB’s stable of companies.

In a rare media briefing last November, PNB also indicated that it is weighing spin-offs and demergers to create value in its strategic investee companies — those it has a majority stake in. This is part of its five-year strategic plan up to 2022 to boost the overall performance of its investment holdings.

Recently, there was also a demerger push at Sime Darby Bhd — another PNB majority-controlled entity — to spin off its plantation and property divisions some 10 years after a mega merger that created the conglomerate. Sources tell The Edge that the plan, long in the works, saw renewed vigour following Wahid’s appointment to PNB.

But that perception of PNB driving the UMWOG demerger is far from the truth as the decision came from the management level, UMW Holdings CEO Badrul Feisal Abdul Rahim clarifies. Furthermore, the consideration began after he took the helm and a decision was reached in the third quarter of last year.

“[The timing] was just a coincidence,” says Badrul. “We looked at four to five options for about eight months and found this option (decoupling UMWOG from UMW Holdings) to be the best going forward.”

A crucial factor in the deliberations was that UMW Holdings’ resources are quite limited. Apart from its RM1.8 billion investment in the new Toyota plant in Bukit Raja, the group has also committed RM750 million to its upcoming Rolls Royce fan case manufacturing plant in Serendah.

“So, it was going to be very stretching as far as UMW is concerned,” says Badrul. “From that perspective, we could not go on like that ... we had to make a decision in the interest of both UMW and UMWOG as well as their shareholders and lenders.”

He says when consulted on the matter, PNB was very supportive of the idea. UMW Holdings began reaching out to Ekuinas after making the decision in 3Q2016.

That led to the deals being struck and announced on Jan 19, according to Badrul.

In another twist of happenstance, however, PNB’s new CEO is Datuk Abdul Rahman Ahmad, whose appointment to the fund manager began on Oct 1 last year. He had been Ekuinas’ CEO up to his move to PNB.

Abdul Rahman was also appointed to UMWOG’s board as chairman on the day the demerger was announced.

“It was quite a good coincidence that Tan Sri Wahid came into PNB and then Datuk Abdul Rahman also joined,” says Badrul, chuckling at the point that Abdul Rahman had also come from Ekuinas. “But the decision was made earlier, so it was not because [Wahid and Abdul Rahman] were there that we had to do this.”

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