STEC Turns Down STPI Deal, Seeing Sharp Plunge in IRR amid Ongoing Covid-19 Situation

Sino-Thai Engineering and Construction Public Company Limited (STEC) on September 10, 2021, announced that the Board of Directors have resolved to not enter into a transaction with STPI in the acquisition of its subsidiary, STIT.

 

STEC stated that following the Board of Directors meeting on September 24, 2020, the Boards resolved to acquire STIT Co., Ltd., seeing the business would benefit and promote the company’s business as well as a good return on investment.

 

However, the Covid-19 epidemic situation that has been a severe outbreak since January 2021 and continually severe after April 2021 until the present, affects the whole country in terms of economy and society.

Moreover, the bidding of government infrastructure projects has been delayed and private construction work has also slowed down, which is expected to not recover in the near term. This will significantly affect the investment in STIT Co., Ltd.’s business.

 

STEC stated that the company has hired a financial advisor, C.J. Morgan Company Limited to jointly prepare a financial projection under a new assumption that a situation has changed significantly from the impact of the Covid-19 epidemic.

The financial advisor stated that when considering investments including interest, the return on equity from the investment in STIT will be reduced to 0.16% from the previous estimate of 16.53%, which is not worth the return on investment at this time, making it a significant changes from what it was proposed to the Extraordinary General Meeting of Shareholders on November 27, 2020.

 

The company made an attempt to negotiate for the price of purchasing STIT from STP & I Public Company Limited (STPI) and acknowledged that STPI confirmed the same price, hence the two parties did not achieve the agreement.

 

Therefore, the Board of Directors’ meeting considered with caution, to protect the interests of the company and shareholders, that the investment in STIT based on the previous terms and conditions is not worth the investment. Consequently, it was resolved unanimously to not enter the STIT acquisition transaction.

 

Moreover, STEC also reiterated that there will be no impact to the company and shareholders from not entering the transaction.

The company has not yet entered a transaction, thus, the damage to the company or to the shareholders has not happened. As for concerns on financial risk, due to the cancellation of investment in other companies, the cash flow of STEC will be more liquidated for better core business operations. Also, the company has not entered into a share purchase agreement, thus, there is no issue of fines or opportunity cost and any other damages.