Thai Tycoons Top Dealmakers With Record Spending: Southeast Asia

Thai Tycoons Top Dealmakers With Record Spending
Charoen Sirivadhanabhakdi, chairman of Thai Beverage Pcl., right, and his son Thapana Sirivadhanabhakdi, executive vice-president of Thai Beverage Pcl., stand together during a function in Bangkok, Thailand. Photographer: Udo Weitz/Bloomberg News

Charoen Pokhpand Group Co.’s $9.4 billion purchase of a stake in China’s Ping An Insurance (Group) Co. puts Thai companies and their billionaire owners among the ranks of Asia’s biggest overseas acquirers.

The record $25 billion of Thai purchases abroad announced so far in 2012 is more than in the previous 12 years combined and behind only Japan and China in the Asia-Pacific region, data compiled by Bloomberg show.

Thai companies, recovering from last year’s floods, are starting to deploy the cash they’ve built up since the country became a flashpoint for Asia’s financial crisis 15 years ago. With billionaire Charoen Sirivadhanabhakdi attempting a $11.4 billion takeover of Singapore’s Fraser & Neave Ltd., Thai acquirers are now involved in two of the four largest cross-border deals by Asian companies this year.

“There are companies in Thailand that have strong domestic market positions that are now at an inflexion point, where they need to decide whether to build a pan-Asian footprint or choose not to be part of the game,” said Philipp Lotter, an analyst at Moody’s Investors Service in Singapore.

Billionaire Dhanin Chearavanont has built CP Group into a global business with operations in agriculture, retailing, trading, telecommunications, property development and petrochemicals, employing more than 250,000 people. Along the way, he amassed a $6.2 billion personal fortune, according to the Bloomberg Billionaires Index.

Shifting Priorities

Dhanin, 73, will buy HSBC Holdings Plc’s 15.6 percent stake in Ping An in two phases, with the first to be completed by Dec. 7, according to a statement yesterday. CP Group says on its website that it became the first major foreign investor in China in 1979 after Deng Xiaoping started free-market reforms.

Charoen, with a net worth estimated at $8.5 billion, controls Thai Beverage Pcl, the maker of Chang beer. Thai Beverage gets about 96 percent of its sales from Thailand, Bloomberg data show. Fraser & Neave’s businesses range from property to soft drinks.

The acquisition spree underscores how Thai companies are moving from being low-cost producers of export goods to trying to take advantage of buoyant demand in Asia, said Alan Richardson, a Singapore-based fund manager who helps oversee about $82 billion for Samsung Asset Management.

Cash Stockpile

“You’re now seeing the model of companies trying to grow demand within Asia rather than creating exports for western markets,” said Richardson. “They have a lot of cash available, and until now there’s been almost no expansion since the Asian financial crisis.”

Cash held by Thai companies has quadrupled in the past decade, according to data compiled by Bloomberg. Total cash holdings of the 422 non-financial members of the Bangkok SET Index for which data is available reached $18 billion as of Sept. 30. The companies held about $4.4 billion in cash at the end of 2002, the data show.

In 1997, Thailand triggered the Asian financial crisis when it devalued the baht to shore up a faltering economy, abandoning its policy of pegging the currency to the U.S. dollar. Investors sold Asian stocks and currencies, causing neighboring economies including Malaysia and Singapore to shrink, and leading Thailand, South Korea and Indonesia to seek bailouts from the International Monetary Fund.

PTT’s Spree

As their global ambitions grow, Thai companies are rubbing up against overseas competitors for assets. PTT Exploration & Production Pcl in July beat out Royal Dutch Shell Plc to buy Cove Energy Pcl for $1.9 billion. Charoen’s offer for Fraser & Neave faces a counterbid by real-estate company Overseas Union Enterprise Ltd.

Dhanin’s investment in China’s second-largest insurer marks a departure in the country for Thai companies, which traditionally viewed it as an export market according to Credit Suisse Group AG. Before the deal, his only insurance asset was a joint venture in Thailand with Germany’s Allianz AG.

The value of overseas acquisitions by Thai buyers averaged $379 million annually from 2000 to 2009, data compiled by Bloomberg show. Deals jumped to $7.3 billion in 2010 and slipped to $5.9 billion last year, according to the data.

State-controlled PTT Pcl, Thailand’s biggest energy company and the parent of PTT Exploration, led acquirers with $5.7 billion of deals since 2010, the data show. That tally includes PTT Exploration’s takeover of Cove Energy and an acquisition by PTT Global Chemical PCL.

Financing Deals

“That is certainly a push to diversify oil and gas reserves and secure long-term energy supply for Thailand,” Moody’s Lotter said.

Both CP Group and Charoen are using Asian lenders to fund part of their deals. CP Group will tap state-owned China Development Bank Corp., according to HSBC. Charoen’s Thai Beverage held talks with about six banks, including lenders from Singapore and Malaysia, for financing of its acquisition, people familiar with the matter said in September.

To pay for its purchase, PTT Exploration raised about $3.1 billion in Thailand’s largest stock sale on Nov. 30, as the benchmark SET Index rose to its highest in more than 16 years.

The acquisitions by Thai conglomerates this year also shows their wealthy owners seeking to move money out of the country amid lingering political unrest, said Justin Harper, a strategist at IG Markets in Singapore.

“Enormous wealth has been created there and tycoons and billionaires are keen to get some of their money out of Thailand for diversity and political risk,” Harper said. “We’ve been on the receiving end of a lot of Thai money coming out into other parts of Asia.”

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