Analysts Expect Higher Dividend from Bangchak after the Acquisition of ESSO

Bangchak Corp had formally announced to make a tender offer of 34% of ESSO shares at 9.89 baht per share from September 8, 2023 until October 12 of 2023.


Following the announcement, Trinity Securities reports a positive outlook on Bangchak Corporation Public Company Limited (SET: BCP) as BCP moves forward in acquiring ESSO from ExxonMobil Asia Holding Pte. Ltd.


The security firm believes that Bangchak’s 34-billion-baht investment for taking over ESSO will instantly provide the company with an extraordinary item to its balance sheet worth 5-10 billion baht. 128 hectares of land are said to be the contributor of such surplus in which the profit will be realized in Q3/2023.


Also, the merger between the two companies allows for synergy up to 2-3 billion baht per year, reflecting an upside to BCP’s share price of around 7-10 baht per share. Overall, the stated profit is expected to be allocated for an extra dividend payment.


Yesterday, Bangchak announced that it had entered into a long-term credit facility arrangement with Bangkok Bank for a total credit line of not more than 32,000 million baht, without collateral, to support the acquisition of ESSO. The loan’s payment date will be 30 months after the first loan drawdown. The loan will be used in two parts. First is a 22.6 billion baht for the purchase of 66% of ESSO shares from ExxonMobil Asia Holding Pte. Ltd. Second is for conducting a mandatory tender offer to minority shareholders for the remaining 34% of ESSO shares (Mandatory Tender Offer).


Trinity Securities maintains a “BUY” recommendation on BCP shares, with a target price of 49 baht per share. The expansion is not confined to the synergy between the two companies, but it also will strengthen Banchak’s asset to become more holistic, as Bangchak will be equipped with the upstream, midstream, and downstream oil facilities for cost effective management.


Additionally, Krungsri Capital Securities expected the agreement between Bangchak and Bangkok Bank will partly contribute to loan growth of the bank and its bottom line should expand 53% this year, seeing a target price for Bangkok Bank Pcl. at THB 220 per share.