Indorama takes over Tuntex

The deal will mean that IRP's production capacity will increase from 100,000-00,000 tonnes per year. It will control 40 per cent of the local polyester market.

In addition, the company expects to double its revenue to more than US$4.2 billion (Bt139 billion) over the next two years. Its revenue target this year is $3 billion.

The deal brings the company's total investment in the Kingdom to Bt22 billion. It now employs 2,500 people, of whom 100 are Indians working in senior management.

IRP's chief executive, Aloke Lohia, said the company had signed a memorandum of understanding with Tuntex to acquire its business as a part of a strategy to expand the scale of its production and to integrate the production of purified terephthalic acid (PTA), polyester and polyethylene terephthalate (PET). The deal will also create sustainable competitive advantages.

Lohia said IRP had spent more than Bt2 billion on the deal and on production improvements at Tuntex's plants which are expected to be complete by April. Of the investment, 50 per cent will come from equity and the rest from financing.

IRP will hold 90 per cent of Tuntex (Thailand) and will automatically have a minority interest of about 15 per cent in Tuntex Petrochemicals, the country's first PTA producer.

"If we created a polyester plant of the same size, we would need to spend around Bt7 billion," Lohia said, adding that the acquisition would make a strategic fit with Indo Poly, an IRP subsidiary with an existing polyester plant in Nakhon Pathom province. Indo Poly's production capacity is 100,000 tonnes of polyester per year.

Lohia said IRP's revenue from this segment was expected to rise from $131 million last year to $600 million in 2010.

"Thai garments for the high-end market are still competitive. Large global companies don't want to buy only cheap products from China or India. They want to buy high-quality products from Thailand," he said.

About 80 per cent of IRP's new production capacity is expected to be devoted to exporting to 63 countries. However, its main markets are in South America and Europe. At present, exports account for 40 per cent of IRP's production.

Lohia said demand for polyester trended to increase as cotton prices rose. In addition, polyester is a raw material used in producing a variety of automobile-related and household goods, and is not used only in the textile industry.

Thailand is the company's manufacturing base for polyester and PTA while its US and European plants focus on PET. The company is exploring business opportunities in Brazil, Russia, India and China.

IRP expects to gain benefits from the Japan-Thailand Economic Partnership Agreement, in business dealings involving the "very high-end" market in Japan.

At present, IRP has three business units dealing with the production of PTA, polyester and PET. It has seven manufacturing plants in Saraburi, Lop Buri, Nakhon Pathom, Rayong and Bangkok.

Chalida Ekvitthayavechnukul,

Achara Pongvutitham

The Nation