SINGAPORE/HONG KONG Thai corporates armed with cheap debt and record stock prices have spent a record $27 billion shopping for overseas assets this year, putting the Southeast Asian nation firmly on the region's M&A map for the first time.
The land of exotic beaches has emerged as an unexpected fee pool for deal-starved bankers in the region, with the nation ranking No. 3 in Asian outbound deal volumes this year, behind Japan and Greater China.
The second-half surge in Thai purchases this year has been fuelled by a steady stream of loans, which carries an added layer of risk compared with all-cash acquisitions.
Thailand's M&A spree has catapulted some of the country's reclusive tycoons into the media spotlight and made them formidable competitors in auctions for overseas assets.
Gutsy bids for London's Cove Energy and Singapore conglomerate Fraser & Neave Ltd (F&N) (FRNM.SI) underscore the ambition of these tycoons, who have been bolstered by a surging stock market and the first period of relative political stability in more than six years.
With the latest transaction, total Thai M&A volumes could exceed the combined total of the previous four years, with more action in the country this year than Australia, Malaysia and South Korea combined.
"This could be the best time for Thai companies to get capital or funding cheaply and pursue growth where they are good at," said Daphne Roth, head of Asia equities research at ABN AMRO Private Banking.
Some analysts and bankers say the flurry of deal activity in Thailand is a one-off event, with little chance of matching its M&A volumes next year.
Still, after three domestic insurance auctions launched this year, plus several major cross-border deals, yet another major Thai deal emerged with just a few weeks left in the year.
On Wednesday, a group linked to Thailand's wealthiest businessman, Dhanin Chearavanont, agreed to buy HSBC's (HSBA.L) entire stake in China's Ping An Insurance (601318.SS) for $9.38 billion.
"Myriad Thai corporates across industry segments are seeing greater opportunities to expand their footprint, both across the region as well as on a global basis," said David Aronovitch, co-head of Southeast Asia investment banking at Morgan Stanley, which is advising the Thai group involved in the F&N bid.
"Whilst Asia-Pacific is the natural focus for many of these businesses, there is an increasing appetite to identify and pursue opportunities beyond the region, and in particular in Europe."
In addition to an equity boom that is helping fuel the activity, the ambition for Thai corporates to grow outside their saturated home market is another major factor behind the money.
Many of these deals are backed by cheap bank loans.
Companies linked to beer mogul Charoen Sirivadhanabhakdi lined up S$11.8 billion ($9.7 billion) to buy a 34 percent stake in F&N and bid for shares they do not already own. China Development Bank is financing CP Group's purchase of Ping An.
"After a decade-long slumber, Thailand's M&A scene has burst into life over the last 12 to 18 months and is now one of the most vibrant and interesting M&A markets in the Asia-Pacific region," said Citigroup's Asia-Pacific M&A head Colin Banfield.
"Personally, I am spending more time in Thailand now with our local clients than at any time since the Asian Crisis back in 1997-98," said Banfield, who expects the M&A trend to continue next year, given the pipeline of deal activity.
Prime Minister Yingluck Shinawatra's Puea Thai Party swept to victory in a general election in July 2011 and Thailand has since enjoyed a period of relative calm after the convulsions that followed the ousting of her brother, Thaksin Shinawatra, from the premiership in a 2006 coup.
But the country remains politically fractured between the pro- and anti-Thaksin camps, and Thai billionaires may be moving money overseas to reduce their dependence on their home market.
"Usually when you see tycoons do this, they try to move money overseas," said an investment banker who asked not to be named. "They want to de-risk themselves from any one geography."
The banker said he does not expect the same pace of dealmaking next year, but identified Thailand's Central Group as one of the groups which could still seek retail assets abroad.
Last year, the group's Central Retail Corp bought Italian department store chain La Rinascente SpA.
The banker said Malaysian companies have also been pursuing a similar strategy, buying real estate and other assets to reduce their reliance on one market.
Mark Matthews, head of Asia research at Bank Julius Baer, said Thai offshore deals had accelerated in the last two years as prior to the fourth quarter of 2010 Thai companies were heavily restricted in their overseas investments by the Bank of Thailand.
"Thailand runs a current account surplus so if the central bank didn't let the private sector re-cycle some of the inflow, it might create unhealthy distortions in the domestic economy," he said.
Thailand had a current account surplus of $11.9 billion by the end of last year, IMF data shows.
Acquisitions can bring growth, but also risks.
ABN AMRO's Roth pointed to Thai coal producer Banpu Pcl's BANP.BK acquisitions in China and Australia over the last few years, some of which have not gone smoothly.
"We have seen that when the tide turns and when coal prices started to fall, then we don't get the visibility from both demand and supply, then that could also cause the stocks to underperform," she said.
Roth said weakened valuations in Europe might throw up a lot of opportunities for Thai companies, but she would take a cautious view on firms making acquisitions outside their core area of business.
Thai equities have been among the best performers in Asia and globally, with the benchmark index .SETI trading at a 16-1/2 year high on Tuesday. The index has surged 30 percent so far this year.
Last month, HSBC strategists retained their overweight call on Thai equities and said the country was on "cruise control". A tight labor market and low household leverage supported resilient domestic consumption, the brokerage said.
"If I talk to ASEAN companies, in general, many of these Thai companies are more proactively thinking of entering their hinterland - Myanmar, Laos, Cambodia, Vietnam, but also thinking about the business implications of the ASEAN (economic plan) whereby some of the trade restrictions go away," said Herald van der Linde, head of Asia Pacific equity strategy at HSBC.
($1 = 1.2175 Singapore dollars)
(Reporting by Saeed Azhar, Anshuman Daga and Denny Thomas; Editing by Michael Flaherty and Alex Richardson)
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