Guangdong Guangken Rubber Group Co expects to list its operation in Thailand on stock exchanges in Thailand and Hong Kong in two years after its acquisition of Thai Hua Rubbr Public Co, the world's third largest natural rubber group.
One of the largest natural rubber companies in China, with a full business chain, including seedlings, farming, processing and sales, Guangken completed its acquisition of a 60 percent stake of Thai Hua at a price of 1.2 billion yuan ($174 million) in August. It plans to invest an additional 600 million yuan. Including the acquisition, Guangken has annual natural rubber processing capacity of 1.5 million metric tons and rubber farms of 2 million mu (133,330 hectares).
Before the acquisition, it was already running rubber processing plants in Thailand and Indonesia, farms in Malaysia and Cambodia, and a trading company in Singapore, said Xiong Yinzhong, a board director of the group.
Thai Hua has an annual processing capacity of about 1 million tons, with Thailand housing about 40 percent of the world's output. The China-based processing capacity of Guangken stands at 200,000 tons a year.
China is the largest rubber consuming country, with annual output of 800,000 tons, compared with demand for 4.8 million tons.
The acquisition of ThaiHua is in line with the industrial policy under the country's Belt and Road Initiative and also gives Guangken a comparative advantage, because Southeast Asian regions are better located for rubber farming, Xiong said.
Guangken's capital and managerial advantages will be combined with Thai Hua's strength as an international brand, in cooperation with tire companies in China, he said." In many business sectors, including resource sectors, the trend is there to centralize."
Apart from overseas listings, Guangken is also eyeing domestic listing of the whole group in three years, Xiong said.
Guangken is set to gain significant cost advantages thanks to the lower land and labor costs in Thailand, facilitated by the ASEAN-China Free Trade Area, said Cao Xiaping, associate professor and PhD program director with the finance department, Lingnan College, Sun Yatsen University in Guangzhou.
The stable political situation in ASEAN members makes the region a good choice for Chinese companies in their "going global" pursuit, he said, adding companies like Guangken can raise funds in the local markets in ASEAN, given the wide acceptance of renminbi there.
The acquisition of ThaiHua came at a good time, given the low global rubber price, said Xu Wenying, secretary-general of the China Rubber Industry Association.
Guangken was the first Chinese rubber company engaged in overseas rubber farming and this latest acquisition will help it in overseas resource allocation and pricing, she said, noting that Guangken has the opportunity to supply rubber to four tire plants invested by Chinese companies in Thailand.
A subsidiary of Guangdong Agribusiness Group, Guang-ken received a capital injection of 500 million yuan from China Agricultural Industry Development Fund and China Cinda Asset Management Co.