Citic mulls offer for Thai resources firm
The mainland's largest state-owned investment firm is vying to become a white knight for Thailand's largest petrochemical company in a move that could help Thai Petrochemical Industry (TPI) founder Prachai Leophairatana thwart Thai government efforts to have the firm taken over, mainly by state-owned firms.
Mr Prachai has until late August to raise enough capital to repay creditors and avoid a dilution of his stake from 25 per cent to 10 per cent, under a court-approved government plan.
Citic Resources Holdings, the listed natural resources arm of China International Trust & Investment Corp, has signed a memorandum of understanding with Mr Prachai and his family to form a joint venture to buy a 75 per cent stake in TPI worth more than US$2 billion.
The stake is being sold by the administrator of TPI on behalf of its creditors to help repay the US$2.7 billion debt run up by the company during the boom years of the 1990s. TPI defaulted on the debt during the Asian financial crisis.
The agreement gives Citic Resources an exclusive right to conduct due diligence on TPI and negotiate with Mr Prachai on a possible restructuring proposal.
If the proposal is subsequently approved by the Thai bankruptcy court and TPI's creditors, it will nullify an agreement between the Ministry of Finance, TPI's administrator, and an investor consortium led by state-owned oil firm PTT.
The memorandum, signed on Wednesday, will see PTT buy existing and new shares in TPI, giving it a 31.5 per cent stake in the company.
The four other members of the consortium will each buy a further 10 per cent.
The purchase price of 3.30 baht per share is 76.2 per cent lower than yesterday's market closing price of 13.90 baht, which is 13.3 times TPI's forecast earnings per share for this year, according to Bloomberg.
Although Citic Resources was holding only about US$206 million in cash at the end of last year, a spokeswoman said the company was confident it would be able to generate the necessary financial resources to proceed with any proposed bid for TPI.
TPI is subject to a foreign shareholding limit of 49 per cent.