BANGKOK -- Thailand's Gulf Energy Development is set to fully enter the country's telecommunications industry after reaching a deal to take a hefty stake in mobile network operator InTouch Holdings.
In a tender offer that closed on Wednesday, Gulf Energy secured subscriptions for 747 million shares, or 23.3% of all issued shares in InTouch, which itself is a major shareholder of Thailand's largest mobile telco giant.
Gulf Energy, an up-and-coming conglomerate known for its power generation business, will have a 42.2% stake in InTouch when the deal is completed on Aug. 11, up from its previous 18.9% share. This will put it ahead of Singapore's Singtel, which holds 21% of InTouch.
InTouch has a significant presence in Thailand's telecom industry, as it has a 40% stake in leading mobile operator Advanced Info Service, or AIS. It also holds 41% of satellite operator Thaicom.
Gulf Energy offered 65 baht for each issued share, roughly 11% above the market price when the offer was made. InTouch shares were trading at 62.5 baht on Wednesday. Gulf Energy needs 48.6 billion baht ($1.46 billion) to acquire all the subscribed shares.
Buying into InTouch and indirectly owning part of AIS has pros and cons, analysts warn.
"The acquisition of InTouch and AIS would provide more diversified cash flow and a larger income base for the power company, although a debt-funded structure is likely to put additional pressure on Gulf's stretched balance sheet," Fitch Ratings director Obboon Thirachit said in April, when the offer intention was announced.
Gulf Energy, Thailand's largest private power producer by market value, reported an EBITDA (earnings before interest, tax, depreciation and amortization) of 13.5 billion baht in 2020, while AIS generated 76.6 billion baht. The power company's net debt-to-EBITDA ratio, a measurement of leverage, stood at 8.8 times, compared to 1 for AIS.
Gulf Energy is owned by billionaire Sarath Ratnavadi, who has been growing more active in Thai business circles since 2007. Originally a power business, his company now runs motorways and an LNG terminal in Rayong Province.
Listing the company in 2017 pushed Sarath up the rich ladder. According to Forbes, he owned assets with a net worth of $8.8 billion as of July, making him Thailand's fifth-richest man.
In April, the company said it is ready to apply for a short-term bridge loan of 150 billion baht from local and international financial institutions to fund the share purchase.
Apart from diversifying its portfolio, the offer was seen as Sarath attempting to put Thailand's telco giant more firmly in Thai hands. InTouch was originally founded by former Prime Minister Thaksin Shinawatra as Shin Corp. The telco holding company was sold to Singapore sovereign wealth fund Temasek Holdings in 2006. The sale resulted in a public backlash, which grew into protests that led to a coup that same year.
Singtel Global Investment's 21% stake in InTouch and Singtel Strategic Investments' 23% stake in AIS are results of the 2006 deal between Temesek and InTouch.
Thai regulations required that Gulf Energy also make an offer to acquire AIS, as its stake in the company was expected to surpass the 25% threshold as a result of the InTouch deal.
However, Gulf Energy's offering price for AIS was at a discount of 23% from the market price, raising questions over how serious the company was about pursuing the deal. Gulf had earlier said it would raise its offer price for AIS if its stake in InTouch surpassed 50%, but that condition was not reached.
Meanwhile, the energy company requested a waiver from the Securities and Exchange Commission for making a similar mandatory offer for Thaicom shares. Gulf Energy did not elaborate on why it would not make an offer for the satellite operator, but analysts have interpreted the move as a sign the company has less interest in the satellite business than in the mobile telco business.