PTTGC and SCGC Plan 186.5 Billion Baht Petrochemical Venture, Targeting 2027 Completion

A 56% controlling stake and billions in planned savings

PTT Global Chemical (PTTGC) and SCG Chemicals (SCGC) have agreed the main terms of a venture combining Thai petrochemical businesses valued at 186.514 billion baht, with annual benefits estimated at 5.1 billion to 6.8 billion baht once integration takes full effect.

PTTGC would own 56% and retain control, while SCGC, the chemicals subsidiary of Siam Cement (SCC), would hold 44%. The proposed transaction would bring together plants making basic chemical ingredients and plastics, along with infrastructure, marketing operations and stakes in related businesses.

PTTGC has scheduled an extraordinary shareholders' meeting for December 3, 2026. Completion is targeted for the second half of 2027, subject to shareholder votes, competition clearance, other regulatory permissions and third party consents.

The agreement comes as SCC faces immediate pressure from weaker petrochemical earnings. Its chemicals subsidiary recorded a loss of 1.738 billion baht in the third quarter of 2026, while its Vietnamese Long Son Petrochemicals project, which stays outside the venture, lost 3.326 billion baht.

The commercial plan is to connect PTTGC's access to raw materials, refinery infrastructure and basic chemicals production with SCGC's manufacturing technology, product range and expertise in more valuable plastics. The companies expect to improve existing operations rather than build new plants to achieve the stated benefits.

SCC president and chief executive Thammasak Sethaudom notified the Stock Exchange of Thailand of the agreement on October 28, 2026. SCC described the combination as a way to strengthen Thailand's global competitiveness and build a regional petrochemical leader.

For shareholders, the central calculation is whether better coordination across the two businesses can deliver enough recurring savings and additional earnings to offset weak industry conditions, integration costs and the effects of the ownership split.

Which plants and investments would move?

PTTGC's contribution includes five Thai olefins plants, polyethylene facilities, utilities and infrastructure. It would also transfer its 41.4% stake in HMC Polymers and its wholly owned GC Marketing Solutions business, alongside associated liabilities, investment promotion benefits, licences and land leases.

Olefins are basic chemical building blocks used to make many materials. Polyolefins are a family of plastics that includes polyethylene and polypropylene, widely used in packaging, containers and manufactured goods. Crackers are plants that turn raw materials such as naphtha or ethane into these chemical building blocks.

SCGC's package includes olefins operations at Rayong Olefins (ROC) and Map Ta Phut Olefins (MOC), polyethylene operations under Thai Polyethylene (TPE), and participating polypropylene facilities. Its contribution also includes investments in Siam Polyethylene, Siam Synthetic Latex, Bangkok Synthetics and Thai MMA.

Long Son Petrochemicals in Vietnam is excluded. SCGC would also retain its vinyl businesses, recycling operations, and services and solutions businesses. SCC's wider priorities, including cement with lower carbon emissions, packaging and Cleanergy, remain separate from the combination.

How the merger would work without a cash payment

PTTGC would first establish a wholly owned subsidiary called GC SPV and transfer its participating businesses into it. SCGC would reorganise its relevant Thai operations under TPE.

GC SPV would then merge with TPE. GC SPV would survive, taking over TPE's assets, liabilities, rights, duties and responsibilities, while TPE would cease to exist as a separate legal entity. GC SPV would issue shares to SCGC as payment.

The negotiated values are 104.44784 billion baht for PTTGC's businesses and 82.06616 billion baht for SCGC's, adding up to 186.514 billion baht. Those contributions correspond to the proposed 56% and 44% ownership shares.

The companies used discounted cash flow valuations. In simple terms, this method estimates the cash a business may generate in future and calculates what that money is worth today, allowing for time and risk.

No cash consideration would change hands for the merger, and external funding would not be required to finance that consideration. Either party could still need to inject capital if working capital before the merger differs from agreed levels. Working capital is the money needed to keep daily operations running, including funding inventory and payments due from customers.

Where the annual benefits would come from

PTTGC and SCGC estimate recurring annual benefits of 5.1 billion to 6.8 billion baht, equivalent to about US$150 million to US$200 million. These benefits, often called synergies, are savings or extra earnings the companies expect to achieve by operating together.

Raw material sourcing is one major opportunity. PTTGC brings connections to refinery operations and the wider PTT supply network. Coordinating purchases and allocating available feedstock across plants could give the combined business more flexibility to choose economical inputs.

InnovestX estimates that initial improvements could cover about 15% to 30% of SCGC's total feedstock requirements. Its assessment points to connections with refineries, aromatics operations, condensate processing and ethane supplies as potential sources of greater flexibility.

Operations at more than 30 plants in the Map Ta Phut industrial estate could be coordinated, according to the same assessment. Shared maintenance planning, plant shutdown schedules, utilities, energy management and asset use would be early priorities.

Procurement, transport, marketing and administration offer further opportunities to reduce duplication. Combining basic plastics with products using specialised technology could also help the venture serve more customers and improve its sales mix.

PTTGC expects the stated benefits primarily from existing assets without additional capital expenditure. The estimates are unaudited and unreviewed, and actual results depend on execution and market conditions. The companies have not given a detailed annual schedule for realising the full amount.

Why the size and timing of savings matter

Citi compares the annual benefits target with combined earnings before interest, tax, depreciation and amortisation (EBITDA) of roughly 12 billion baht. EBITDA is an earnings measure that helps investors compare business operations before financing, taxes and certain accounting charges.

The proposed 5.1 billion to 6.8 billion baht in benefits equals about 43% to 57% of that 12 billion baht benchmark. The calculation shows how much of the investment case depends on successful integration: the expected improvement is large relative to the earnings base Citi uses.

InnovestX expects benefits to build after closing and reach their full potential within three years, around 2030. Management has described the estimate as an initial phase, with further opportunities possible from later integration.

InnovestX estimates potential profit gains for PTTGC of 7% in 2027 and 11% in 2028, and for SCC of 3% and 9.5%, respectively. Its 2027 estimate for SCC assumes completion around the middle of that year, earlier than the companies' target of closing in the second half.

Citi reaches a more cautious result when examining the ownership split against total EBITDA in 2024 and 2025: a possible 3% reduction for PTTGC and a 2% increase for SCC. It says that result could reverse using SCGC's stronger attributable EBITDA from 2023, although it considers a repeat of that performance unlikely as products become more widely available and harder to distinguish on value.

Different assumptions about existing earnings, the closing date and the pace of savings therefore produce different estimates of the financial outcome.

Control, dividends and a change in SCC's accounts

PTTGC would nominate four directors to the venture's seven member board and choose its chief executive. SCGC would nominate three directors and the deputy chief executive.

PTTGC would consolidate the venture's financial statements because it would retain control. This means including the venture's assets, liabilities, revenue and expenses in its group accounts, while accounting separately for the share belonging to SCGC.

SCC would use the equity method to account for the investment as an associate. Instead of including each participating business's sales, costs, assets and debts separately in its group statements, SCC would record the investment and recognise its share of the venture's results.

Citi estimates that about 60% to 70% of SCGC's sales would leave its consolidated accounts. SCC expects its share of the venture's earnings to support profit, while dividends received would affect its future EBITDA under the presentation it has outlined.

The venture's proposed dividend policy calls for distributions of at least 60% of consolidated net profit after tax and required legal reserves. Further distributions may be considered after allowing for necessary investment, working capital and other operating needs.

Debt allocation remains important to the financial outcome. Citi estimates that approximately 130 billion baht of SCGC's 160 billion baht in third quarter gross debt could remain with SCGC, potentially connected to financing for Long Son Petrochemicals.

InnovestX describes initial net debt for the venture of about US$1.5 billion, comprising roughly US$900 million from PTTGC and US$600 million from SCGC and TPE. It cites a target ratio of net debt to equity of 0.26 times, while Citi expects net debt to EBITDA below four times. These measures compare borrowing with different financial bases: shareholder capital and annual operating earnings.

How large would the combined business be?

BLS Research estimated combined installed production capacity of 11.2 million tonnes a year in an analysis dated October 26, 2026, comprising 6.1 million tonnes from PTTGC and 5.1 million tonnes from SCGC. InnovestX puts polyolefins capacity above 7 million tonnes a year and ranks the proposed business first in Asia and tenth globally in that product category.

The capacity figures refer to different descriptions of the production base: BLS's combined installed capacity and InnovestX's polyolefins capacity. Installed capacity measures how much plants are designed to produce in a year; actual output depends on demand, maintenance and operating decisions.

BLS also estimated revenue of 344 billion baht, net profit of 20 billion baht and total assets of 343 billion baht. Its analysis preceded the October 28 agreement and assumed PTTGC ownership of 51% to 55%, compared with the subsequently agreed 56%.

Citi calculates that the negotiated valuations imply prices of about 1.22 times book value for PTTGC's assets and 0.94 to 1.09 times for SCGC's. Book value is the value recorded in the accounts. Citi attributes the gap between those multiples to differences in debt allocation.

Weak earnings explain the urgency

SCC reported third quarter net profit of 2.386 billion baht in 2026, down about 79% from the preceding quarter, although it recovered from a loss of 669 million baht a year earlier. SCGC swung from a second quarter profit of 4.82 billion baht to a third quarter loss of 1.738 billion baht.

Lower petrochemical margins were a major pressure. The price spread between high density polyethylene and naphtha fell 27% from the preceding quarter, while the spread between polypropylene and naphtha declined 14%. These spreads show the gap between product prices and a key raw material cost, helping explain the pressure on manufacturing earnings.

Long Son Petrochemicals, which stopped production in the middle of May, recorded a loss of 3.326 billion baht, compared with 631 million baht in the preceding quarter. SCC expects operations to restart in 2027. Its project to increase ethane use is progressing ahead of schedule, with Phillip expecting use of the cheaper feedstock around the middle of 2027.

SCC shares fell 12 baht, or 4.32%, to 266 baht during morning trading on October 29, 2026. Broker targets nevertheless remained above that price: the six firms assessing the company in one group placed targets between 290 and 315 baht, while Finansia maintained 312 baht and BLS retained 332 baht.

Nearer term operating views vary. Krungsri projects petrochemical sales volume growth of about 13% in the fourth quarter following ROC's restart in the middle of September. Trinity points to MOC maintenance in November and seasonally weaker demand as pressures on earnings. These operating changes will affect performance before the venture is expected to close.

The votes and approvals still required

PTTGC classifies the deal as a special material transaction, with a maximum transaction size of 23.2% under the net tangible assets criterion. Approval requires at least three quarters of the votes of shareholders attending and entitled to vote, excluding interested shareholders. Asia Plus Advisory has been appointed independent financial adviser.

The transaction also requires SCGC shareholder approval, clearance from the Trade Competition Commission of Thailand, other regulatory permissions and relevant third party consents. SCC has also planned an extraordinary shareholders' meeting for December 3, 2026.

The planned sequence is:

• October 28, 2026: SCC disclosed agreement on the main terms and ownership structure.
• November 11, 2026: PTTGC's record date to determine eligibility for its shareholders' meeting.
• November 18, 2026: Planned dispatch of extraordinary meeting notices.
• December 3, 2026: Extraordinary shareholders' meetings scheduled to consider the proposal.
• First half of 2027: Planned competition and other regulatory applications and progress on required conditions.
• By the middle of 2027: PTTGC expects to complete its internal restructuring.
• Second half of 2027: Targeted merger completion and establishment of the venture.

Industry volatility, difficulties combining operations and approval delays could affect both the timetable and financial benefits. Management's current priority is coordinating assets and improving efficiency, with plant closures or production reductions not a central part of the initial plan.

Key Points

• PTTGC and SCGC propose combining Thai petrochemical businesses valued at 186.514 billion baht.
• PTTGC would hold 56%, control the board and consolidate the venture; SCGC would hold 44%.
• The merger payment would consist of shares, although working capital adjustments could require capital injections.
• Annual benefits are estimated at 5.1 billion to 6.8 billion baht, with a gradual build after completion.
• Long Son Petrochemicals and SCGC's vinyl, recycling and services businesses remain outside the venture.
• Shareholder meetings are scheduled for December 3, 2026, with completion targeted for the second half of 2027.
• The venture targets dividends of at least 60% of consolidated net profit, subject to reserves and its operating and investment provisions.