Energy conglomerate Bangchak Corporation Plc (BCP) expects its buyout of Esso (Thailand) Plc for 55.5 billion baht to pave the way for higher revenue, gaining a larger market share in the oil retail business and lower costs, though the new asset acquisition will increase its debt.
Chaiwat Kovavisarach, group chief executive and president of BCP, views the purchase price as "reasonable", though its debt-to-equity ratio will rise to 1.7 times, up from 0.6 times.
BCP plans to pay for the shares with a secured bank loan and cash on hand.
He is aware of the automotive industry's shift towards battery-powered cars, but believes demand for oil will remain high for decades, so the company decided to invest in an oil refinery.
The purchase of Esso (Thailand) Plc was planned four years ago.
Mr Chaiwat said the new asset will be among the revenue boosters for BCP, expected to increase earnings before interest, tax, depreciation and amortisation to 100 billion baht by 2030, up from 37.8 billion during the first nine months of last year.
The new asset increases BCP's refinery capacity by 174,000 barrels per day, bringing its total capacity to 294,000 barrels a day, according to BCP.
Synergy with Esso is expected to help BCP save 1.5-2 billion baht in operating costs, he said.
BCP's market share in the oil retail business will increase to 21.8%, up from 10.8%, which would make it second in the country after PTT Oil and Retail Business Plc at 42%. Coming third is PTG Energy (10.9%).
BCP filling stations should increase to 2,100 after the acquisition.
Mr Chaiwat said he is not worried petrol stations run by Esso will be located in the same areas as BCP's because the two companies usually operate facilities in different locations -- Esso in cities and BCP in suburban areas.
The name of Esso stations will be changed to Bangchak, but Esso staff will continue to work under the new company, he said.
"Our high-ranking executives at BCP came from Esso. We don't think there will be a culture shock in the workplace," said Mr Chaiwat.
BCP on Jan 11 entered into a share purchase agreement to buy 2.283 billion ordinary shares of Esso (Thailand) from ExxonMobil Asia Holdings Pte, according to its letter submitted to the Stock Exchange of Thailand.
The transaction is expected to be completed in the second half of 2023.
According to BCP, the enterprise value of Esso (Thailand) is estimated at 55.5 billion baht, with an indicative price of 8.84 baht per share, based on the company's financial performance in the third quarter of 2022.
"The final purchase price per share will only be determined at completion and will be calculated based on the latest audited or reviewed financial statements on the completion date," BCP said in the letter.
The company plans to launch a tender offer for the remaining 34.01% of ordinary shares held by other shareholders of Esso (Thailand) after the transaction is completed.
ExxonMobil Asia Holdings Pte retains finished lubricant and chemical marketing businesses after the transaction.
