In this briefing:
1. GPSC To Proceed With Glow Takeover, But At What Price?
Global Power Synergy Company Ltd (GPSC TB) announced on the 20 June last year an intention to acquire 69.11% of Glow Energy Pcl (GLOW TB) from Engie SA (ENGI FP) at Bt96.5/share (reduced to Bt94.892/share subsequent to an interim dividend of Bt1.608), valuing Glow at US$4.4bn or 2.86x P/B. Once the acquisition was approved, the remaining 30.89% of shares would be subject to a mandatory tender offer.
The key issue raised at the time was that the transaction would give GPSC a monopoly on power purchase agreements in Map Ta Phut, Thailand’s largest industrial park.
Despite what appeared to be a non-issue from an anti-trust point of view (as discussed in Anti-Trust Should Be A Non-Issue In The GPSC/Glow Deal), on 11 October 2018 the Energy Regulatory Commission (“ERC”) notified the public of its decision not to give its approval for the transaction. Glow’s shares declined ~6% on the news.
An appeal to reconsider ERC’s decision was dismissed on 14 December.
After an announcement alluding to multiple interests for Engie’s stake, on the 27 December Glow announced that ERC has resolved to approve the merger with GPSC, provided Glow sells its Glow SPP1 plant before or at the same time as the merger. A number of conditions were also attached to some of the remaining power plants.
No price has been disclosed for the 69.11% stake in Glow, ex the SPP1 plant.
The current upside is (at best) 6.8% to an indicative offer price Bt95.86, assuming Glow can sell SPP1 at the same multiple under GPSC’s initial offer and GPSC continues to assign the same multiple to Glow even after the sale of SPP1. That would appear a stretch. However, SPP1 is estimated to account for just ~5% of Glow’s energy output and revenue. And media are reporting Engie itself may acquire the plant, which should smooth and expedite the completion of the transaction.
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