When Kan Trakulhoon, chief executive of Thailand’s Siam Cement Group, wanted to buy Indonesian petrochemical company Chandra Asri a decade ago, he courted the owners assiduously.
The Harvard-educated Trakulhoon was no stranger to Indonesia, having spent a stint in Jakarta during the throes of the Asian financial crisis in 1997.
However, he had little luck convincing the owners to sell.
“Many years ago in 2004, 2005, I myself went to the management and owner of this company more than 10 times in order to acquire this company [Chandra Asri] but they didn’t want to sell,” recalls Trakulhoon in a phone interview with FinanceAsia from Bangkok.
Chandra Asri, a company with a history of restructuring its debt, remained out of Siam Cement's grasp for a while longer.
In 2007, Barito Pacific, the holding company for Indonesia timber tycoon Prajogo Pangestu, bought a 70% stake in the Indonesian petrochemical giant from Strategic Investment Holdings Ltd and PT Inter Petrindo Inti Citra, Panjestu's investment arm.
It was not until 2011, when Singapore investment company Temasek Holdings wanted to sell its minority stake and approached Siam Cement, that the Thai conglomerate - 30% owned by Thailand Crown Property Bureau - got a leg in.
Siam Cement bought Temasek’s 22.9% stake in 2011 and also managed to secure an additional 7% stake from Barito Pacific, bringing its stake up to 30%. Trakulhoon’s experience sheds light on the patience and tenacity that is required in deal-making in Asia.
Founding families often hold controlling stakes and are unwilling to relinquish control. "It is hard to get majority deals of size in Indonesia," said one Singapore-based M&A banker who declined to be named.
"Siam Cement has a robust balance sheet and I think they would have liked a larger stake but that was all that was on offer," he added.
Despite the hurdles involved in deal-making, Trakulhoon has bold ambitions to grow Siam Cement through acquisitions.
Trakulhoon said that the company plans to spend Bt200 billion to Bt250 billion ($6.2 billion to $7.7 billion) on acquisitions and capital expenditure over the next five years.
However, he declined to say exactly how much Siam Cement will spend on acquisitions, given the uncertainty over deals closing. “M&A always depend on the opportunity,” said Trakulhoon.
However, acquisitions are at the top of his to-do list and, after taking a more laid-back approach in previous years, Siam Cement is now actively scouring the horizon for deals.
“In the past many years, we [have been] passive. I travel a lot to partners in the region but I never ask them if they want to sell the business to us, until the partner’s business [is] very bad, then they ask if we want to buy the business,” said Trakulhoon.
“Now we are more proactive. We plan [on] which target companies we would like to have, list down all their names and approach them,” he added.
According to Trakulhoon, the company is eyeing acquisitions in Southeast Asia. It is also on the look-out for technology companies that provide software for petrochemical business. "We are in discussions with some companies that have the know-how and the brand," said Trakulhoon.
Since 2011, Siam Cement has already spent $2.1 billion acquiring a swath of companies, mostly in chemicals, cement and paper. About half of these companies have been in its home market Thailand, and the rest in Indonesia and Vietnam. In total, Siam Cement has bought 58 companies during the past three years.
The company has spent roughly $2.5 billion on greenfield and brownfield projects but such projects are fraught with challenges as it takes painstaking effort to acquire land, licenses and build up a plant up from scratch.
Siam Cement’s plant in West Java, for example, took seven years to develop. “For greenfield, [there are] a lot of challenges,” said Trakulhoon. “That’s why now, the priority will be more on the M&A,” he added.
