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The Nation

Thai Oil will pay about US$120 million (Bt4.12 billion) to buy a group of companies that manufacture, distribute and market hydrocarbon solvents in Thailand and Vietnam, to strengthen its long-term growth and establish an international presence.

It is the company's first foray into the solvent business.

Thai Oil yesterday told the Stock Exchange of Thailand it had signed an agreement with Shell Overseas Investments and Pattanakij Chemical to acquire 80.52 per cent of shares in their solvent-production joint venture, Sak Chaisidhi.

It also agreed to purchase solvent-distribution and -marketing businesses from Shell of Thailand and Shell Vietnam.

The company said the moves served its business strategy of strengthening its long-term growth and establishing a presence in the international market. Its combined investment in the three businesses is about $120 million.

Thai Oil managing director Viroj Mavichak yesterday said his company planned to establish new subsidiaries to acquire the 80.52-per-cent stake in Sak Chaisidhi and purchase and operate the solvent companies in Thailand and Vietnam.

The acquisition of Sak Chaisidhi's shares and the Shell solvent business are expected to be complete by December, while the Shell Vietnam transaction is expected to be completed by early next year.

Bualuang Securities analyst Thanatthep Chantarakarn said Thai Oil's expansion into the solvent business would boost its profit for next year between Bt700 million and Bt800 million above his original forecast of Bt16 billion.

"This $120-million investment will not create financial problems for Thai Oil, because it paid quite a low dividend in the middle of this year, which was believed to have been a result of its plan to allocate some of its cash to future investment. At present, it also has a strong cash flow," Thanatthep said.

Sak Chaisidhi has operated a hydrocarbon-solvent manufacturing plant in Rayong's Map Ta Phut Industrial Estate since 1991. In 1993, Shell Overseas Investments and Pattanakij Chemical acquired an 80.52-per-cent interest in the company, which has an annual manufacturing capacity of more than 80,000 tonnes and supplies the local market.

Viroj said expected benefits of the investment included immediate access to a sizeable network of customers, distribution and marketing businesses with experienced personnel and increased distribution channels for the products of Thai Oil and its subsidiaries.

The solvents businesses in Thailand and Vietnam are focused mainly on local markets. At present, Shell of Thailand and Shell Vietnam are among the market leaders in terms of market shares in both countries.

Thai Oil is one of Thailand's biggest oil refiners and suppliers, with a refining capacity of 275,000 barrels per day. Its share price closed yesterday at Bt29.75, up from Bt27.25 last Friday.