Xiyang and Picon sign MoU for NFC stake

15 September 2003 00:00  [Source: ACN]

Chinese fertiliser major, the Xiyang Group and Thai construction company, the Picon Group, have signed an MoU to jointly acquire a strategic stake of 51–71% in Thailand’s debt-ridden National Fertiliser Co (NFC) after two years of talks.

The final sale agreement is expected to be signed by the end of this year, provided approval is obtained from the Thai Bankruptcy Court.

The remaining two potential bidders for the stake, Sumitomo Corp and SVM Property, withdrew their offers, leaving only the Xiyang-Picon consortium in the fray, an NFC source said.

NFC’s financial adviser, CJ Morgan, had invited some 40 fertiliser and agrochemical businesses to bid for the stake by the 4 June deadline this year.

Xiyang and Picon have formed a joint-venture to acquire the NFC stake, the source said. The joint venture plans to inject Baht1.5bn (US$37m) to repay NFC’s outstanding debt. NFC had a total debt of Baht14.15bn at the end of last year.

A plan to restructure NFC’s debt has been drawn up and also awaits approval by the Thai Bankruptcy Court by the end of this year, ACN was told. The plan would include a debt-for-equity swap, the source said. Further details of the debt-restructuring plan were not available last week.

The joint venture also plans to inject

paid-up capital of Baht13.1bn to offset losses. NFC has accumulated losses of Baht12.8bn.

Under the proposed sale agreement between NFC and Xiyang-Picon, NFC creditor, the Bank for Agriculture and Agricultural Cooperatives, has the option to exercise its right to acquire 20% of the 71% stake.

Should the bank decide not to exercise the option, the Xiyang-Picon joint venture would have the right to buy the 20% stake.

NFC’s existing shareholders – the Petroleum Authority of Thailand (20%), the Government Savings Bank (12%), the Industrial Finance Corp of Thailand (16%), Siam Commercial Bank (9%), Siam City Bank (6%), Thailand’s Ministry of Finance (6%) and the general public (30%) – would see their stakes diluted to a total of 29% if Xiyang-Picon acquires the full 71% share in the company.

If the Xiyang-Picon joint venture acquires NFC, the fertiliser producer could ramp up production to its nameplate capacity of 1m tonne/year, the NFC source said.

A shortage of working capital forced the Thai producer to cut production at its fertiliser plant to 240 000 tonne last year, down from 500 000 tonne in 2001.

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