Analysts are optimistic about Bangchak Corporation's (BCP) reported interest in acquiring Esso (Thailand) for 30 billion baht, saying the deal would enable BCP to cut operating costs and expand the business.
There were media reports that BCP, the SET-listed oil refiner and retailer, wants to acquire 65% of Esso (Thailand), a unit of US-based ExxonMobil, for 12-14 baht per share.
Including the cost of the tender offer process, BCP is likely to spend up to 48 billion baht for the deal.
"We believe BCP does not need to increase its registered capital to complete the deal. The company will wait for the board of directors' meeting in 1-2 weeks to endorse the plan and close the deal, which could happen as soon as the third quarter this year," Kasikorn Securities (KS) said in a research note.
BCP secretary Wannasiri Trongtrakulwong said in a filing to the Stock Exchange of Thailand (SET) on Dec 30 regarding a report about the acquisition that the company "usually considers investments", but "currently there is no definitive resolution including details and conditions of any investment".
"Our investments are aligned with the policies, strategies and business operations of the company, with a focus on innovations for sustainable growth," the statement added.
Analysts said the price range of 12-14 baht per Esso (Thailand) share is reasonable, citing clear synergies between the two firms as well as reduced risks if BCP has to relocate its refinery out of central Bangkok.
"If this deal happens, we are upbeat about this acquisition based on clearly anticipated operational synergies, such as different refining technologies across the two refineries that will enhance the flexibility of BCP," said a KS analyst.
BCP crude oil transport costs will be reduced by using Esso's receiving system to supply BCP's refinery. In addition, both firms could synergise the retail oil business, said the analyst.
Esso's refinery is currently bottlenecked, while BCP's refinery is unable to expand capacity. The deal would help to expand economy of scale for both companies' refineries and increase opportunities for BCP to grow its retail businesses in the future, according to analysts.
The analysts recommend investors buy BCP shares if the price declines from about 30 baht a piece at the moment, especially if they believe the acquisition price will be lower than the price quoted, or if there are other financing techniques for the deal without needing to increase capital.
Shares of ESSO were down 4.88% on Wednesday afternoon to 11.70 baht.
