TTA jumps ship with plan to buy fertiliser factories

Thoresen Thai Agencies (TTA), a diversified shipping firm, is thinking about acquiring more fertiliser factories this year via its subsidiaries as part of its business expansion plan, focusing on Africa and Asian markets as priority targets.

With young executive Chalermchai Mahagitsiri, son of coffee tycoon Prayut Mahagitsiri, at the helm for the past three years, TTA generated a record net profit of Bt154 million in 2014, compared to a net loss of Bt5.08 billion a year earlier.

"We are looking for growth, not just organic, outside Thailand by acquiring more potential interests in fertiliser factories. Now, we are in talks for two merger and acquisition deals," Chalermchai said.

TTA is no longer just a shipping firm as its contribution to the shipping business was only one-third of its total revenue. About 40 per cent was from its submarine engineering business via Mermaid Maritime Plc and the remaining contribution was from PM Thoresen Asia Holdings Plc (PMTA), the revenue from which comes from the fertiliser business.

"There is still a lot of room for growth in the fertiliser business, especially in agricultural-oriented countries," Chalermchai said.

It is possible to close the M&A deals this year, he said, and the company would use proceeds from selling initial public offering (IPO) shares of PMTA to fund the transactions.

Considered an investment arm of TTA, PMTA currently holds a 100-per-cent stake in two companies: Vietnam-based premium-grade fertiliser producer Baconco and PM Thoresen Asia (Singapore).

Baconco, which was taken over by PMTA in 2009, has enjoyed profits of around Bt200-300 million annually for several years. It’s headquartered in the Phu My I Industrial Park, Ba Ria - Vung Tau area, 70 kilometres south of Ho Chi Minh City.

On Friday at the industrial park in Ba Ria - Vung Tau, Baconco held a grand opening ceremony of its new fertiliser production line with a capacity of 100,000 metric tonnes a year. It also a new bulk warehouse with space of 21,200 sqm, and new 34,000-sqm bonded warehouse, operated under a joint venture between Thoresen-Vinama Logistics and Baconco.

The expanded production will add to Baconco’s total capacity of 450,000 metric tonnes of fertilisers a year. Currently, Baconco is running at 50 per cent of its total capacity.

Baconco produces and sells a wide range of fertilisers via three main production processes: granulation, compaction and bulk blending. As for the domestic market in Vietnam, Baconco claims to be the market leader with 25 per cent share. The company also has a network of more than 10 dealers in other countries.

"We are looking for new investments like small units that can produce fertiliser in Africa and Myanmar," said Sigmund Stomme, managing director of PMTA and Baconco.

He said Baconco is still focusing on growing markets in the Middle East and Asia like Angola, Cameroon, Zambia, Iraq, Lebanon, Cambodia and Myanmar. He said about 85 per cent of Baconco’s revenue breakdown was from NPK compounds under the granulation process.

Chalermchai said he expected PMTA’s IPO shares selling would receive a good feedback from TTA’s existing shareholders, who were offered a 100-per-cent preemptive right to subscribe to PMTA’s IPO shares at a ratio of existing 37 TTA share for one PMTA share.

PMTA is set to sell its total 35.42 million IPO shares, of which 27.32 million shares will be from TTA and the remaining 8.10 million shares from its capital shares increase. PMTA is in the process of listing its shares on the Stock Exchange of Thailand and will open for IPO shares subscription starting from today (March 30) to Friday (April 3). The PMTA’s IPO price is at Bt18 each.

After subscription, TTA’s 100-per-cent shareholding in PMTA will be diluted to 65 per cent.