BANGKOK • Mr Sarath Ratanavadi, Thailand's second-richest man, is trying to diversify his empire with a bold bet on digital technology that may cost as much as 534 billion baht (S$22.7 billion).
He will have to do more to convince sceptics that the maths add up.
While shares of Mr Sarath's Gulf Energy Development have climbed 4.6 per cent since the company proposed buying control of Thailand's biggest mobile operator and its parent on Monday, some analysts and investors are worried that the cost of added debt will not be worth the pay-off.
The acquisitions would combine a group spanning power plants, ports and toll roads with telecommunications companies that specialise in digital services.
"Gulf may know how to create the synergy, but some investors still haven't seen this," said Mr Prapas Tonpibulsak, chief investment officer at Bangkok-based Talis Asset Management, which does not own Gulf shares. "Gulf's debt will jump substantially."
The conglomerate, controlled by the 56-year-old Sarath and his family, this week offered to purchase about 81 per cent of Intouch Holdings - a Singtel associate company - that it does not already own in a deal amounting to 169 billion baht.
Subject to securing at least 50 per cent of Intouch, the group will also tender for 100 per cent of Advanced Info Service (AIS), the wireless service. For the latter deal, it will need an additional 365 billion baht.
Gulf's net debt almost doubled to 120 billion baht last year, according to data compiled by Bloomberg.
Mr Sarath is the latest Asian energy billionaire to invest in technology-linked assets, joining the likes of Mr Mukesh Ambani and Mr Gautam Adani.
In a statement on Monday, Gulf said the acquisitions will generate long-term benefits and cash flows. It also said it will fund the two acquisitions with internal cash and debt, and that it has already secured about 160 billion baht of loans.
Shareholders will meet on June 25 to consider the proposals.
Adding Intouch, a holding company with presence in telecoms, satellites and e-commerce, will allow Gulf to ride the digital business with the post-pandemic era set to accelerate automation and work from home, said Mr Smith Banomyong, Gulf's chief of asset management and investment, who discussed the bids on Monday in Bangkok on behalf of Mr Sarath.
Mr Suwat Sinsadok, an analyst at Finansia Syrus Securities in Bangkok, said power producers one day could directly sell electricity to businesses and retail customers.
AIS' 40 million users could be a ready audience, he added.
Mr Suwat said: "The world in the future is about convergence, platform and big data. Gulf probably envisions that, so it needs platforms and a customer base."
Gulf's proposed offer of 122.86 baht apiece for AIS shares - a 30 per cent discount to its current price - means the bid is unlikely to attract current shareholders, according to SCB Securities.
Mr Prapas said that while debt is a concern, the dividend yield of 3.9 per cent from Intouch will be sufficient to cover Gulf's additional borrowings to finance the acquisition.
Gulf's interest cost for new loans would be no more than 3 per cent, according to Mr Smith.
However, Mr Kaushal Ladha, an analyst at Maybank Kim Eng Securities (Thailand) noted that there is a lack of clear synergy between energy and telecoms, and the cost of raising debt for the acquisition at 2 per cent to 3 per cent compared with Intouch's dividend yield would mean "marginal value-add" for Gulf.