Perspective of Super Tower: Planned as the tallest building in Thailand but the project's future is now uncertain after its developer Grand Canal Land Plc was taken over by CPN Pattaya Co Ltd.
Perspective of Super Tower: Planned as the tallest building in Thailand but the project's future is now uncertain after its developer Grand Canal Land Plc was taken over by CPN Pattaya Co Ltd.

Property giants stir market with M&A deals 

Real Estate October 08, 2018 01:00


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SHORTAGE OF available land in the central business district and fierce market competition have led to a slew of merger and acquistion (M&A) deals among property developers in recent years, say experts in the industry. 

“The Bt20.14 acquisition last month of a majority stake in Grand Canal Land Plc(GLAND) by CPN Pattaya Co Ltd, a subsidiary of Central Pattana Plc (CPN), showed the demand for land on Rama IX Road,” a source said. 

The takeover occurred as GLAND was developing Super Tower, which would be the tallest building in Thailand on completion. The tower is located on prime land, close to CPN’s shopping centre and is suitable for development as a mixed-use project. It now remains to be seen whether the new owner will stick to the existing project or replace it with one of its own. 

According to a survey by The Nation, the total value of merger and acquisition deals exceeds Bt50 billion since 2014 (see graphic).

Thai conglomerates were the major players in M&A deals – such as TCC Group of beverage tycoon Charoen Sirivadhanabhakdi, and Singha Group owned by the Bhirombhakdi family. The moves are seen as a vehicle for back-door listing in the Thai stock exchange. 

However, some of the deals involved listed property companies taking over listed and non-listed firms to boost their realty portfolio. 

For example, Singha Property Management Co Ltd, the property arm of Singha Group, changed the name of Rasa Property Development Plc to Singha Estate Plc after acquiring a majority stake for Bt7.78 billion in Rasa in 2014. It was followed by a Bt1.7 billion share-swap deal between Singha Estate and Nirvana Development Co Ltd the next year. 

In 2016, Singha Estate Plc pulled off a Bt3.39 billion share-swap deal between Nirvana Development Co Ltd and Daii Group, designed for Singha to make inroads into the middle-income residential market. 

Chuan Tangmati-tham, the founder and owner of MK Real Estate Development Plc, decided in 2015 to sell his family stake in the property company to Castle Peak Developments and CPD Holding Group for a combined Bt1.2 billion. In the year 2018, Supalai Plc also tried to acquire a major shareholding in MK Real Estate Development Plc but it managed just 0.30 per cent at the close of the tender offer. 

In 2015, Property Perfect Plc acquired a majority stake in Thai Property Plc for more than Bt1.8 billion, making it the major shareholder in Grand Asset Hotel and Property Plc through Thai Property Plc.

Recently, duty-free operator King Power Group, splashed out Bt14 billion on the acquisition of condominium units and the observation deck of the MahaNakhon project from Pace Development Plc.

Asia Plus Securities Co Ltd vice president Terdsak Taweethiratham said, “Since the asset value of most listed property firms is above their accounting value and share price, it poses a challenge for investors interested in merger and acquisition of the companies.

“For example, CPN stands to gain from the GLAND deal as the latter’s asset on Rama IX Road has a higher market value when compared with the company’s book value,” he said.

“We bought a listed developer in order to survive the market competition after the country’s two beverage tycoons, Charoen Sirivadhanabhakdi and Santi Bhirombhakdi, stepped up their investments in the market,” said Chainid Adhyanasakul, CEO of Property Perfect Plc.

Merger and acquisition is a means of survival for lesser players as big conglomerates expand their presence, he said.

Joint-venture deals with large overseas property companies with a view to expand their investments here is another option for local developers to survive the fierce competition. A number of listed Thai developers, including AP (Thailand) Plc, Ananda Development Plc, Sansiri Plc, Property Perfect Plc, Sena Development Plc, Origin Property Plc have opted for partnership with foreign companies. 

“Besides developing a condominium project with our foreign partner, the joint venture also comes with the transfer of design skills and new technology to the benefits of our future projects,” said Ananda Development president and CEO Chanond Ruangkritya.

AP (Thailand) Plc chief executive officer Anuphong Assavabhokhin said the joint venture firm between the company and its Japanese partner Mitsubishi Estate Group has improved the firm’s construction process and project designs.

“Technology transfer is the main reason for us to team up with Mitsubishi Estate Group, while financial support for business expansion is also a factor in the present environment,” Anuphong said. 

M&A activities and joint ventures are changing the face of the property market during this period of tough competition. Currently, the top 10 residential developers account for more than 70 per cent of the total market value, or Bt600 billion a year.