[The Nation] SCG in rush for M&A deals within Asean before AEC

SCG in rush for M&A deals within Asean before AEC

Published on August 1, 2011


The Siam Cement Group is rushing to conclude mergers and acquisitions in the region within two years in order to meet its target to boost its assets in Asean to 20 per cent of its total assets by 2015.

“We have to hurry to close the targeted deals within two years. Otherwise, these deals will be more expensive and it will be difficult for SCG to finalise them,” Chaovalit Ekabut, vice president for finance and investment and chief financial officer, said recently.

SCG aims to become the industrial leader in Asean once the Asean Economic Community takes place in 2015. It has pursued this target since 2006 by negotiating to take over many enterprises in the region, focusing on the building material, cement, distribution and petrochemical businesses.

Five years after the company started to take M&A seriously, its Asean assets are worth Bt30.45 billion, accounting for 8 per cent, lower than SCG’s expectation due to the disruption during the global financial crisis in 2008. Now SCG is accelerating its M&A activities so that it can finally achieve its target.

Many investors from various countries are looking to invest in Asean, so SCG is facing fiercer competition for M&A deals. Japan is one country trying to expand in this region. Japanese companies are entering Malaysia and Indonesia. Indonesia is now very attractive for the automobile industry.

Indonesia accounts for the biggest share of assets for SCG with a value of more than Bt10 billion after the company concluded M&A deals with PT Keramika Indonesia Asosiasi Tbk, a ceramics manufacturer, and PT Kokoh Inti Arebama Tbk, a building materials distributor. The total value of the two M&A deals was Bt6.5 billion, and SCG is expected to post revenue of Bt4 billion per year from the businesses.

SCG’s assets in Vietnam are about Bt10 billion, the second biggest share in Asean. The company already has a network in all Asean countries. It is not necessary for the company to have manufacturing plants in every country, as the single market in 2015 will enhance the flow of exports among Asean members.

“We set an investment budget as high as Bt150 billion from 2012-16. Our net debt-to-equity ratio is not lower than 2 times, and our ceiling is 3 times. So, the budget for M&A is not our concern,” he said.

The revenue generated from Asean in the second half of this year was Bt11.4 billion, accounting for 6 per cent of SCG’s total sales. It is hard to set a target for revenue contribution from Asean over the next four years as the revenue generated from Thailand grows as well, but the revenue contribution from Asean should improve in line with the assets.

Kan Trakulhoon, president and CEO, said SCG was going in the right direction by investing in Asean countries. Many global firms in the past years overlooked this region, but now they are also coming here.

“There are some Western companies asking SCG to invest in their businesses, but we still focus on this region,” he said.

The main focus for SCG was Indonesia, Vietnam and the Philippines. For the cement business, the company eyes Vietnam and Indonesia for investment. It will consider increasing cement production capacity in Cambodia within the next few years. The Philippines is also inviting SCG to invest in the cement industry in the country, but the company has to consider cautiously as energy costs in that country are high.



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