BOC Group acquires majority interest in Thai gas firm

BOC Group, the British industrial gas giant, took a 79 % interest in Unique Gas and Petrochemicals (UGP), through its wholly-owned Thai Industrial Gas (TIG) at a cost of $ 44 mm, aiming to tap the cooking gas market in Thailand. TIG acquired 8.36 mm shares in the listed UGP at 237 baht per share.
The total investment was $ 44 mm or 1.98 bn baht. Chris Browning, managing director of TIG, said the acquisition would trigger a mandatory tender offer at the same share price for the remaining 21 % of UGP shares. Thai Industrial Gas will fund the acquisition via borrowings.
"With UGP in our organisation, we will add ammonia and LPG or cooking gas to our growing portfolio of products. This acquisition will provide us with excellent opportunities to enhance value and our services to our customers," he said. Mr Browning said the acquisition would result in no dramatic changes to UGP and its employees. Future opportunities in the group's cooking gas business would be developed on UGP's existing strongbase, he added.

Phaibul Chalermsaphayakorn, outgoing CEO of Unique Gas, said that teaming up with the world's leading industrial gas giant would be a new beginning for the company, enabling it to forge ahead with business development. TIG and Unique Gas will continue to be run as separate companies for now.
Established in 1982, Unique Gas is a major local distributor of petroleum and chemical products. It specialises in products for industrial as well as for commercial and domestic use. The company has sustained an average gross profit margin of 14 % for several years and has no long-term debts.
Sasikorn Charoensuwan, research manager at Phillip Securities, said the acquisition price at 237 baht each for UGP shares was reasonable. "Both UGP and TIG will receive mutual benefits. The BOC Group can expand into the cooking gas business while UGP will benefit from the BOC's stronger network and financial base," she said.

Low-profile UGP has had annual profit growth of almost 20 % in recent years. Last year it posted a net profit of 237.5 mm baht, up from 194.33 mm baht in 2000, on total revenues of 5.77 bn baht. In the first quarter of this year, its net profit was 51.01 mm baht on total revenues of 1.37 bn baht. UGP has 105 mm baht in paid-up capital and 3.18 bn baht in assets.
"We forecast that UGP would continue to grow its business at 20 % this year," said Ms Sasikorn. She said there had been rumours that UGP would be taken over for the past year, driving its share price up from 123 baht last year to a historic peak of 230 baht.
Meanwhile, Pirom Priyawat, president of LPG marketing of Union Gas & Chemical, one of seven licensed cooking gas suppliers in the country, said the cooking gas business was unlikely to see any dramatic changes once TIG joined the market. He said the cooking gas market was currently determined by container investment and it would normally take about five years for a new player to break even.

Currently, PTT is the market leader, followed in order by Siam Gas, World Gas and Unique Gas. Each company holds licences to refill cooking gas containers for suppliers and under the agreements, suppliers must refill their containers only with the gas of the brand they are authorised to use.
"Customers don't pay any attention to the brand. So cooking gas companies that want to increase their market share have to increase the number of their own containers in the market," said Mr Pirom. Currently, local consumption of cooking gas is around 150 mm kg a month. The market has a profit margin of about 400 mm baht a month, with 70-100 mm baht held by the leading players.