SET-listed developer Pruksa Holding Plc (PSH) will dilute its shares in the precast business through a share swap with General Engineering Plc (GEL) and will co-invest in logistics with Singaporean real estate firm Capitaland and Taiwan developer Ally Logistics Property to boost recurring income.
Uten Lohachitpitaks, PSH's group chief executive, said the company would restructure its precast business via an entire business transfer of Quartz Holding 1, one of its subsidiaries in which it held a 100% stake, to GEL.
Quartz Holding 1 currently holds 51% of shares of Inno Precast, a manufacturer and distributor of precast concrete with a production capacity of 4.4 million square metres per year.
The remaining 49% of shares of Inno Precast are held by Quartz Holding 2, one of PSH's subsidiaries in which PSH held a 100% stake.
Meanwhile, GEL produces and distributes prestressed concrete pile products, precast products, bored piles, cement ground piles and precast concrete parts for utility work with a production capacity of 800,000 sq m per year.
"This transaction will make GEL the largest precast producer in Thailand with a combined production capacity of 5.2 million sq m per year," said Mr Uten.
"PSH will receive around 1.57 billion shares as compensation for the transfer of Quartz Holding 1."
These shares will be capital increase ordinary shares which GEL will issue and allocate to PSH at an offering price of 0.37 baht per share, equivalent to 582 million baht.
Once the transaction is completed, PSH will become the shareholder of GEL, holding shares with a proportion of 18.2%.
It expects to complete the transaction within May, he said.
"The merger between Inno Precast and GEL's precast business will be good for both as PSH can increase recurring income through holding an 18.2% share of GEL and a 49% share of Inno Precast."
PSH will also save up to 100-300 million baht in costs per year incurred by Inno Precast, Mr Uten added.
At the same time, GEL can expand its production capacity without new investment of 600-700 million baht for an additional 200,000 sq m and does not need to wait up to 12-18 months to start production.
"Our precast factories started taking jobs from other developers in 2021 and at the end of 2022 we got an order worth 500 million baht to supply this year," he said.
At present, half of the total production capacity of Inno Precast was secured by Pruksa Real Estate, a residential development subsidiary of PSH, and might increase to 70% by 2024-25.
Mr Uten said PSH would book 700 million baht as an accounting gain in net profit in the second quarter of 2023 which would be calculated from GEL's share price of 0.37 baht per share after the share swap.
PSH would also invest in the logistics business through CapitaLand SEA Logistics Fund, a joint venture with Taiwan-based Ally Logistic Property and CapitaLand Investment, a subsidiary of Singapore's real estate investment group CapitaLand.
"Potential locations for our first logistics business will be in eastern provinces and Ayutthaya," he said. "Profit sharing from logistics will start next year."