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Thailand’s leading energy giant, Gulf Energy Development Plc (GULF) late last night made an announcement on the Stock Exchange of Thailand (SET) that it was set to merge with its subsidiary company – Intouch Holding Plc (INTOUCH), in a deal that could value the combined business in excess of 635 billion Baht, a move that would help spur Thai equity markets, analysts say.
GULF, which is owned by one of Thailand’s leading businessman – Sarath Ratanavadi, announced at around 21:24 hrs yesterday that its board of directors meeting yesterday decided to call for an ‘Extraordinary Shareholders Meeting’ (EGM) on October 3, 2024, to present the plans for ‘amalgamation between the Company and Intouch Holdings Public Company Limited (“INTUCH”); the acquisition of securities of Advanced Info Service Public Company Limited (ADVANC) by way of conditional voluntary tender offer for all securities of ADVANC; and the acquisition of securities of Thaicom Public Company Limited (THCOM) by way of conditional voluntary tender offer for all securities of THCOM.’
GULF will hold an EGM on Oct 3 for shareholders to vote on its merger plan with INTUCH. This includes acquiring ADVANC and THCOM through conditional voluntary tender offers of 216.30 Baht/share for ADVANC and 11.00 Baht/share for THCOM.
The plan is for a new public limited liability company (NewCo) to be formed with 14.5 billion shares that will assume all the assets, liabilities, rights, and responsibilities of both GULF and INTUCH.
The share conversion ratio will be 1 existing GULF share for 1.03 NewCo shares and 1 existing INTUCH share for 1.70 NewCo shares (excluding INTUCH shares already held by GULF).
If key amalgamation conditions are met, INTUCH will pay a special dividend per share of 4.50 Baht/share.
Post-merger, Singtel will become a major shareholder in NewCo with a 9.08% stake (down from the previous 24.99% holding it had in INTUCH). The group of current major GULF shareholders, including Sarath Ratanavadi, will hold 59.72% in NewCo (down from their previous 73.84% holding in GULF). Other shareholders with a combined 26.16% stake in GULF will hold 21.16% in NewCo; other shareholders with a combined 27.64% stake in INTUCH will hold 10.05% in NewCo.
Kijapat Wongmetta, analyst at Bualuang Securities, one of the brokerage houses involved in the deal, said that he estimates the total market cap of NewCo at 635 billion Baht, comprising:
- 370 billion Baht from GULF (the market cap of GULF excluding the market cap of its indirect stake in ADVANC through its current 47.37% holding in INTUCH)
- 265 billion Baht from INTUCH’s direct 40.44% stake in ADVANC.
“The estimated market cap implies a market price for a NewCo share of 42.50 Baht. Based on the estimated NewCo stock price and the announced conversion ratio, we expect GULF’s stock price to move closer toward 43.75 Baht, while INTUCH’s price should move closer toward 72 Baht,” Kijapat says.
He added that the target price for NewCo is projected at 65.30 Baht (based on our current target prices for GULF and INTUCH), implying current values of 67 Baht for GULF and 110 Baht for INTUCH. Our NewCo 2024 core EPS estimate is 1.66 Baht, with a current market value implying a 2024 PER of 25.5x. We forecast NewCo’s -26 EPS CAGR at 11.2%,” Kijapat said.
He adds that the merger is a positive development, and that he believes, as it will allow GULF to take control of ADVANC without using cash, reducing its net debt/equity ratio in the long run. Furthermore, the GULF-Singtel partnership will strengthen, with Singtel becoming a major shareholder in GULF.
