KUALA LUMPUR (Oct 6): UMW Holdings Bhd is disposing of a 26% stake in an industrial equipment (IE) arm to Toyota Industries Corp (TICO) for RM260 million, as part of an agreement to collaborate in the IE business in Malaysia, Singapore, Vietnam and China.

UMW’s wholly-owned unit UMW Equipment Division Sdn Bhd is disposing of the stake in UMW Toyota Material Handling Sdn Bhd (UTMH) to TICO, leaving it with a 74% stake, it said.

UTMH is the special purpose vehicle (SPV) for the collaboration, with six IE business units parked under the company as part of an internal sales arrangement.

The disposal of the UTMH stake to TICO is expected to result in a gain on disposal of around RM85.5 million or 7.32 sen per share, UMW said. UTMH saw original cost of investments of RM643.08 million, it added.

The determination of the actual gain on disposal is contingent upon the actual net asset position of UTMH, which includes the six IE companies as of the closing date in end-2023, it said.

UMW Equipment Division inked a share sale and purchase agreement (SSPA) with TICO for the deal, alongside a related shareholders agreement (SHA).

The agreements serve as a framework for the contemplated mutual collaboration between the parties in the IE business, it said.

“The collaboration between the parties is intended to strengthen and expand UMW's IE business by leveraging on TICO to realise its aspiration to develop One Stop Centre capability for the IE and Logistics Automation businesses,” UMW said.

“This is essential as consumers are moving towards Industry 4.0 which is expected to be the next growth area that drives the growth of the IE business.

“The proceeds arising from the proposed transaction will be utilised to meet the working capital requirements, future investment opportunities, capital expenditure and/or the repayment of borrowings of the UMW Equipment Division and UMW Group," it said.

UMW expects the transaction to be completed by end-2023.

Shares of UMW slipped two sen or 0.42% to close at RM4.72, giving it a market capitalisation of RM5.51 billion. The counter has risen by 36% this year.