The deal was signed on June 1 after the board of directors gave its blessing, according to Prasert Bunsumpun, PTT's president.

"This is consistent with PTT's petrochemical business strategy to expand its petrochemical business further downstream in order to benefit from being a fully integrated [company]. This will also enable PTT to immediately enter into downstream petrochemicals," Prasert said in a statement filed with the Stock Exchange of Thailand.

PTT said it would purchase both newly issued and existing HMC shares. The transaction, scheduled to be completed by August this year, will make PTT the largest major shareholder of HMC and give it a say in the company's management.

At present, HMC Polymers' shareholders are Basell Thailand Holdings BV, Bangkok Bank and Huakee Group.

HMC has the capacity to make 420,000 tonnes of polypropylene (PP) products per year. The PP products are different from other petrochemical products produced by PTT group.

HMC also holds 2.8 per cent of shares in PTT Chemicals Plc and 14.3 per cent in Rayong Olefins Plc.

PTT said it planned to increase the capacity of HMC's polypropylene production by 300,000 metric tonnes a year. The planned capacity increase will also help boost HMC's propane dehydrogenation capacity by 310,000 tonnes a year.

Such an expansion will make HMC one of the largest regional PP makers.

PTT will supply HMC with 388,000 tonnes of feedstock propane from its gas separation plants, according to the statement.

As a result of the deal, PTT said that the synergies created by the PP production upgrades would eventually reduce operating and marketing costs while increasing the production of speciality grade PP.

PTT will also gain from HMC's technical, operations and marketing experience, including technology support, called Spherizone, from Basell, one of HMC's shareholders.