Unfavourable tax incentives have forced Thailand's PTT Plc to call off a plan to merge its two subsidiaries, Thai Aromatics (Thailand) Plc (ATC) and Rayong Refinery Plc (RRC with a capcity of 145,000 bpd). ATC is currently expanding paraxylene capacity to 830,000 tpa from 495,000 tpa at an investment of 22 billion baht.
This decision was reached after the Revenue Department ruled that the reduction in the corporate tax rate for listed companies from the normal 30% to 25% for five years would be revoked once its two subsidiaries were merged. The ruling also applied to the earlier merger between another two other PTT subsidiaries _ Thai Olefins Plc (TOC) and National Petrochemical Plc (NPC) _ into PTT Petrochemical Plc.
Ideally ATC and RRC could create a strong synergy through a merger because their production processes, raw materials and supply chains were closely intertwined. But due to the government policy, the company will embark upon alternative plans, wherein PTT would design a new model to maximise the synergy between ATC and RRC while maintaining the tax incentive. One option could be a take over, although PTT had yet to decide which role each one would take
28-Jun-06 
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