Exxon Mobil's Thai Unit, Up For IPO (XOM)

Reuters ran a pretty interesting article regarding Exxon Mobil Corp. (NYSE: XOM) today that really hasn’t gotten much coverage.  Apparently, its Esso (Thailand), its unit of Exxon Mobil in Thailand, plans to raise up to $454 million (14.3 billion Thai Baht) in an initial public offering in April.  Esso (Thailand) is 87.5% owned by Exxon Mobil and the final IPO price and share count will be set on what is April 24 as of today.  It also looks like about 9.6% of the total shares sold will be sold bythe Thai Finance Ministry, which will dilute its percentage ownership.The use of proceeds will be used mostly to repay debt.

After seeing this we dug around for some additional data and wanted to see how this compares to the entire company and what the ramifications could be.  This listing was apparently required under an agreement made in the 1990’s which allowed the oil company to build a refinery in Thailand.  We frequently cover spin-offs, divestitures, break-ups, IPO’s and more in our own open email distribution list.

The operations of Esso (Thailand) is a complex refinery with a capacity of 177,000 barrels per day, and its 2007 results were a net profit of 7.05 billion Thai Baht on sales of almost 200 billion Thai Baht.  Phatra Securities was listed as the financial adviser and lead underwriter for local market share placement and trading in Thailand, and Morgan Stanley was not as the lead underwriter for foreign markets.

If you’ve ever been to Thailand in recent years, you’ll know that the streets are packed full of cars, scooters, and Tuk-Tuk’s.  What is perhaps more interesting is that despite this was under an agreement from old, this could at least get it in the minds of Exxon Mobil Corp. shareholders that the oil giant is willing to look at divesting some units.  We’d urge against falling for that thought too much because the company would probably never want to bust its empire up on its own.  But this will at least be what some investors ponder.

If you want to compare this financially, Exxon Mobil has a market cap of some $460 Billion.  This is only about one-tenth of one-percent of the total size of the company’s entire equity value.  Exxon as a whole also generated US$404 Billion in total revenues in 2007.  This is a small drop in the bucket (or barrel).

Jon C. Ogg
March 31, 2008

Jon Ogg produces the Special Situation Investing Newsletter and he can be reached at [email protected]; he does not own securities in the companies he covers.