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Phatra and Muang Thai to Merge

Jun 18, 2007

By Nuntawun Polkuamdee, Bangkok Post, Thailand

Jun. 19--Phatra Insurance and Muang Thai Insurance, two non-life insurers controlled by the Lamsam family, plan to merge under a strategy to crack the top five in market share within five years.

The new merged company will be the country's seventh-largest, with a 3 percent market share.

Phatra yesterday also announced plans to pay a special dividend of 50 baht per share for a total of one billion baht on Nov 9, with the share register closed on Nov 5. The report helped push Phatra shares up on the Stock Exchange of Thailand by 9.66 percent to 193 baht in trade worth 16 million baht.

The merger process will begin next March and is expected to be completed in April.

Phatra Insurance (PHA) is 40 percent held by the Lamsam family, and has paid-up capital of 200 million baht and a par value of 10 baht per share. Its strength is the general insurance market.

Unlisted Muang Thai Insurance is 50 percent held by the Lamsam family, with another 25 percent held by Belgium's Fortis, and has paid-up capital of 390 million. The company's operations are largely focused on auto insurance.

Kasikornbank controls 7.5 percent of Muang Thai and another 9 percent of Phatra.

Chainarong Rojanasintu, director of investment banking at the financial adviser Phatra Securities, said the new company would have capital of 590 million baht, with a par value of 10 baht per share.

Phatra will swap shares with the new company at ratio of 1:1.9588, while the ratio for Muang Thai will be 1:0.5083. The Lamsam family will control about 40 percent of the new firm; Kasikornbank will hold 7 percent, Fortis 11 percent to 13 percent, retail investors 25 percent and other investors 15 percent.

Mr Chainarong said Phatra shares would continue to trade until the merger in March. Afterward the shares will be suspended for five to seven days until the process is complete.

The new entity will be traded on the Stock Exchange of Thailand under a new stock symbol that has yet to be determined.

Phatra Insurance will hold an extraordinary shareholders' meeting on Oct 10 to approve the merger and special dividend payment, with the share register to attend the meeting closed on Sept 20.

Mr Chainarong said that shareholders of both firms must approve the merger plan.

For Phatra, the Lamsam family would also tender for any outstanding shares from retail shareholders.

Nualphan Lamsam, president of Muang Thai, said the merger would help give the company a broader base of customers and services, as the new firm's portfolio will comprise 35 percent auto insurance and 28 percent general insurance.

Financial institutions and banks would account for 34 percent of the company's channel network, with sales agents comprising 31 percent and direct-sales staff another 15 percent.

Kritaya Lamsam, Phatra's president, said the merger had been under discussion for more than a year.

"We took over a year to finalise the amalgamation and creation of a new company. We realised that it would not just help us gain size, but also strengthen our competitiveness and lower our operating costs," she said.

"We won't lay off any staff, however, although some might rotate to new positions."

Ms Kritaya said the new firm would have capital reserves of 3.6 billion baht, or 10 times more than the regulatory minimum. Shareholder equity would be 3.6 billion baht, with assets of 5.8 billion and liabilities of 2.1 billion.

Of the country's 71 general insurers, Phatra ranks 31st with a 1.2 percent market share, while Muang Thai is in 16th place with a 1.8 percent share.


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