Oct. 1--Siamgas and Petrochemicals Plc (SGP) yesterday signed an agreement to acquire a 99 percent stake in Chevron Ocean Gas & Energy (Cogel), an importer and distributor of liquefied petroleum gas (LPG) bulk sales in China, at a cost of 1.75 billion baht.

The Cogel acquisition, made through SGP's wholly owned subsidiary Siamgas HK, will be SGP's first step to expand its network into Southeast Asia, said managing director Supachai Weeraborwornpong.

"Cogel will become our potential supply base in future markets including Vietnam, Cambodia and also Thailand as well," he added.

Cogel has an underground fuel storage facilities in Shantou, southern China. It imports LPG from the Middle East and Asia-Pacific.

The acquisition worth 1.75 billion baht (US$51 million) will be financed by two sources. SGP will lend Siamgas HK 350 million baht at 5.25 percent interest while SGP will inject 1.4 billion baht into its Hong Kong subsidiary via an equity increase.

The SGP board in May approved a bid for Cogel but the company did not inform the SET due to a confidentiality agreement.

A down-payment of $5 million was paid on the date of agreement while the remaining $46 million will be paid upon the rights transfer. The net payment for the deal is 19.59 percent of SGP's net assets as of June 30 2009.

This year, Cogel's sales volume is projected at about 480,000 tonnes, 40 percent of SGP's total sales volume of 1.2 million tonnes per year. Cogel would contribute almost 10 percent of SGP's revenue and about 5 percent of its net profit.

At the end of 2008, Cogel reported net profit of 101.2 million baht, up from a net loss of 2.31 billion baht the year before and net loss of 312 million baht in 2006. Total revenue was down to 1.72 billion baht from 5.49 billion baht in 2008 and 10.09 billion in 2006.

The deal has a 6.17-year payback period with internal rate of return of 22.1 percent. This is based on the assumption that sales volume grows 8 percent per year while expenses rise by 5 percent per year.

SGP shares closed yesterday on the SET at 8.40 baht, up five satang, in trade worth 26.58 million baht.

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