Quick take: PetChem slides after RM760.8mil Da Vincci deal


KUALA LUMPUR: Petronas Chemicals Group Bhd (PetChem) shares fell in early trade Friday after the group said it would pay RM760.8mil for Dutch firm Da Vinci Group BV.


PetChem, one of top losers on Bursa Malaysia, fell four sen or 0.45% to RM8.80 with 1.06 million shares traded.


PetChem is buying Netherlands-incorporated Da Vinci Group BV from its shareholders, who include, among others, funds managed by Bencis Capital Partner, for €163 million (about

RM760.8mil), to venture into the specialty chemicals business.


The full cash consideration is subject to customary completion adjustments.


Da Vinci is a private limited liability company with global operations involving own-brand reselling, formulating and manufacturing of silicones, lube oil additives and chemicals.


MIDF Research, which has maintained a buy call on PetChem with an unchanged target price of RM10.23, is positive on the acquisition.


“We are positive on this acquisition as we opine that the acquisition will assist in growing PetChem’s specialty chemicals portfolio and grants PetChem the strategic advantage as it provides a compelling entry into the growing silicone business.


“The acquisition will also enhance PetChem’s competitive reach particularly in the Asia Pacific region which hosts a number of PetChem’s clientele,” it said.


MIDF said the acquisition was also in-line with management’s aspiration of venturing into the specialty chemicals business which would enhance its value proposition in terms of offering a broader range of chemical products as well as; cushioning the impact on PetChem’s earnings from the oversupply of chemicals due to newly operational crackers in the Middle East.


“We opine that PetChem will be funding the acquisition via its internally generated funds due to its comfortable cash position which stands at RM10.3bil (excluding borrowings) as of December 2018.


“It is highly unlikely that it will fund the acquisition via borrowing considering the above however; should the need arise, the acquisition will have minimal impact on PetChem’s gearing ratio,” it said.


PetChem’s gross gearing will increase to 0.1x from 0.06x post acquisition should the acquisition be funded through borrowing