Padaeng Industry (PDI) is set to acquire two luxury hotels in Bangkok worth a combined 5 billion baht in a move to diversify into the hospitality business, as the zinc mining firm projects solar farms are no longer lucrative.
PDI said its board of directors approved the acquisition of a 51% stake in two new hotels, the Four Seasons Hotel Bangkok at Chao Phraya River and Capella Hotel Bangkok.
The acquisition extends the company's move into hospitality, following the purchase of a plot in Sathon to develop a 209-room luxury hotel worth 1.5 billion baht that is expected to be completed by 2023.
Tommy Taechaubol, managing director of PDI, said the Four Seasons Hotel Bangkok at Chao Phraya River and Capella Hotel Bangkok have a total enterprise value of 10 billion baht. PDI plans to acquire a 51% stake in Urban Resort Hotel and Waterfront Hotel, which are the holding companies for the Four Seasons and Capella Hotel, respectively, from Landmark Holdings, a subsidiary of Country Group Development.
The 299-room Four Seasons Hotel Bangkok at Chao Phraya River and the 101-room Capella Hotel Bangkok opened recently. They are located on Bangkok's last remaining waterfront plot along the Chao Phraya, spanning over 35 rai.
The acquisition will be financed by the company's existing capital reserves and bank loans at around 50%, with the other half to come from a capital increase.
The company expects to issue another 75 million shares to serve as a warranty for existing shareholders, with an investment ratio of 3:1 and exercise price of 10 baht. According to Investopedia, the exercise price is the price at which an underlying security can be purchased or sold when trading a call or put option, respectively.
The acquisition is a rare opportunity for PDI to acquire an interest in two world-class assets that can recognise revenues immediately and have strong potential for future growth, said Mr Tommy.
The purchases are a continuation of PDI's move into the hospitality sector following the development of the aforementioned 209-room luxury hotel in Sathon.
In the first full year of operations, it is expected revenues from these two hotels will surpass PDI's existing business, which tallies 50 megawatts of total capacity from operating solar farms both in Thailand and Japan.
Mr Tommy said the hospitality industry is going through its most difficult time in decades because of the pandemic, and as such, the opportunities available today are equally rare.
The company will focus on the acquisition of assets that are operating and contributing income to the company now.
Revenue from food and beverage sales and events such as banquets and conferences is another priority, he said.
Acquisitions in this vein are expected to yield stronger returns in the long term as the hospitality business can recover and capital values appreciate.
Mr Tommy said PDI is preparing to raise additional capital through sales of its non-core assets that include zinc mining lands, as well as a rights offering plan to existing shareholders to strengthen its financial position and prepare for further acquisitions.
The firm's board of directors also approved a plan to divest all shares in the companies that hold 36.4MW of Thai solar assets held under PDI's wholly owned subsidiary, PDI Energy.
The sale is to SET-listed Bangkok Aviation Fuel Services for 1.705 billion baht. PDI will also seek investors for solar farms totalling 13MW capacity in Japan.
The company expects to obtain approval at a shareholder meeting on Feb 1 and will subsequently close the transactions by the first quarter of 2021.
According to the SET, as of April 7 SET-listed developer Country Group Development's largest shareholder was the Taechaubol family with over 50% of the shares, with Mr Tommy personally holding about 7.84%. The Taechaubol family holds around 25% of PDI.
Mr Tommy said PDI appointed ACS Advisory as the independent financial adviser to evaluate asset valuation for the two hotels, preparing the material for general investors at the shareholder meeting on Feb 1.