OREANDA-NEWS. HMS Group (LSE: HMSG), the leading pump and compressor manufacturer and provider of flow control solutions and related services in Russia and the CIS, announces today that its subsidiary, Joint Stock Company HYDROMASHSERVICE (“HYDROMASHSERVICE”), has entered into an agreement for the sale of all its shares in Joint Stock Company “Trest “Sibkomplektmontagnaladka” (“SKMN”), representing 67.29% of the aggregate amount of issued and outstanding shares in SKMN.

Transaction rationale:

The transaction is an “as is” sale (without seller warranties) of the business of SKMN, and the consideration is the nominal value of the shares and undertakings with respect to repayment of SKMN's indebtedness. As a result of the transaction, HMS Group will secure repayment of the recoverable portion of SKMN's indebtedness to HMS Group, which will free up capital resources and allow management of HMS Group to focus on development of the core business segments. In connection with the transaction, part of SKMN's indebtedness to HMS Group will be written off (in the amount of RUB 900 million) and the remaining part will be restructured into a secured loan of approximately RUB 810 million, bearing 10.5% interest and repayable in cash and assignment of assets within 3 years.

Artem Molchanov, Managing Director (CEO) of HMS Group, commented:

“Russian market for oil and gas construction has been experiencing downward trends and showing no visible signs for coming recovery. Unfavorable market conditions negatively affect financial results of the construction assets within HMS Group. For 9 months 2013, they generated negative EBITDA which inevitably dragged down the overall Group's performance.

Construction in oil and gas sector has never been a priority for HMS. Our construction assets were acquired for providing auxiliary services under large-scale integrated projects for oil and gas majors. Now we intend to focus on our core markets - flow control machine-building and engineering - so we consider the disposal of SKMN to be a reasonable deal.”

SKMN, based in Tyumen, is a construction firm that provides construction services for the development, construction and installation of oil and gas field facilities. SKMN has been consolidated into HMS Group since July 2007, following the initial acquisition by HMS Group.

HMS Group is the leading pump and compressor manufacturer, as well as provider of flow control solutions and related services to the oil and gas, nuclear and thermal power generation and water utilities sectors in Russia and the CIS. HMS Group's products are mission-critical elements of projects across a diverse range of industries. It has participated in a number of large-scale infrastructure projects in Russia, including providing pumps and modular equipment to the Vankor oil field and pumping stations on recent trunk pipelines projects linking Russia's core oil producing areas to export ports on the Pacific Ocean and Baltic Sea. HMS Group's global depositary receipts (“GDRs”) are listed under the symbol “HMSG” on the London Stock Exchange.