UMW-OG buys Ekuinas’ O&G assets


  • (From left) Maybank Investment Bank Bhd deputy chief executive officer (CEO) Fad’l Mohamed, Syed Yasir, Badrul Feisal, UMW-OG deputy chairman Datuk Abdul Rahman Ahmad and Rohaizad at the press conference in Kuala Lumpur yesterday. Photo by Mohd Izwan Mohd Nazam
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This article first appeared in The Edge Financial Daily, on January 20, 2017.

 

KUALA LUMPUR: UMW Oil & Gas Corp Bhd (UMW-OG) will emerge as a leading integrated oil and gas (O&G) services provider via its proposed consolidation plan, which will see the company wholly acquiring offshore support vessel (OSV) player Icon Offshore Bhd and marine transportation vessel player Orkim Sdn Bhd.

Ekuiti Nasional Bhd (Ekuinas) and UMW Holdings Bhd (UMWH) yesterday outlined plans for the consolidation of the three companies, kicking off the consolidation of local O&G players amid the challenging industry landscape.

“The combination of these three companies will transform us into a leading integrated services provider and will strengthen our capital position.

“And more importantly the emergence of two strategic shareholders, with strong financial positions, who truly believe in our long-term viability and sustainability of the O&G industry,” said UMW-OG president Rohaizad Darus at a media briefing yesterday.

He said the exercise will be facilitated via two separate purchase agreements with Ekuinas for the fund’s stakes in the two companies.

Under the agreements, UMW-OG will acquire Ekuinas’ 42.3% indirect stake in Icon for new UMW-OG shares and 95.5% interest in Orkim for cash. UMW-OG’s acquisitions are valued at RM721.61 million.

UMW-OG will then undertake a mandatory general offer for the remaining shares in Icon at 50 sen apiece, to be satisfied by either cash or issuance of new UMW-OG shares at 80 sen apiece, and does not intend to maintain the listing status of Icon.

The exercise will be followed by a recapitalisation exercise via a rights issue of approximately RM1.8 billion, inclusive of Ekuinas’ application for excess rights shares worth RM322 million. UMW-OG intends to procure similar support from its largest indirect shareholder Permodalan Nasional Bhd (PNB).

The enlarged group will be a major integrated services provider with seven jack-up rigs, one semi-submersible rig, five hydraulic worker units (HWU), 37 OSVs, 14 clean petroleum product vessels and two liquefied petroleum gas marine transportation vessels.

“With the newly acquired fleet of vessels across the value chain, the enlarged UMW-OG will be in apposition to benefit from the expected recovery of activities in the sector through its interests in offshore drilling rigs, HWUs and OSVs, and improved earnings profile through Orkim’s long-term contracted cash flows,” said Rohaizad.

“We are firm believers in the call for consolidation in the O&G sector and are pleased with this transaction that aims to achieve just that.

“While the industry has gone through some rough patches in recent times, the outlook is improving, thus providing an opportune time for us to pursue the consolidation exercise. The transaction enables us to crystallise our investments and increase our commitment through injection of fresh capital via consolidation,” said Ekuinas chief executive officer (CEO) Syed Yasir Arafat Syed Abd Kadir.

Meanwhile, UMWH will exit its O&G operations via a distribution in specie of its entire 55.73% of UMW-OG to all entitled shareholders of UMWH. The group will also progressively exit its 12 non-listed companies.

UMWH president and group CEO Badrul Feisal said the group is looking to dispose of up to seven assets within this year, and aims to complete the disposals by end-2018.

The group will then refocus its operations on its core businesses of automotive, equipment and manufacturing and engineering.

With the completion of the exercise, PNB will emerge as the largest shareholder with a 39.7% stake in UMW-OG, followed by Ekuinas (23.1%), the Employees Provident Fund (12%) and Lembaga Tabung Haji (2.4%) and others (22.7%).