From the archives of Thailand's
newspaper - The Nation dated 10 March
2006.
Some little known issues were left unpublished in Singapore, and
with the upcoming investigations by the Thai police, it will be
interesting to see how Temasek had recently claimed that the Shin
Corp transaction was above board.
:
Shin Corp
sale involved a who's who of Thailand,
S'pore
Temasek Holdings, the Singapore
investment agency, probably never had second thoughts about the
Shin Corp takeover. It believed it had the deal, or so it
seemed.
The deal involved the biggest political and business names in
Thailand and Singapore. The buyer of Shin Corp was Ho Ching, the
chief executive of Temasek Holdings. She is also the wife of Lee
Hsien Loong, the prime minister of Singapore. The seller was Prime
Minister Thaksin Shinawatra of Thailand. His family owned 49 per
cent of Shin Corp.
Ho Ching presides over Temasek's investment portfolio of US$103
billion. Thaksin was serving Thailand as prime minister for a
second term. Relations between Thailand and Singapore had been
rather good, particularly with the Singapore-Thailand Enhanced
Economic Relationship, although there may be a bit of rivalry
between Thaksin and Lee over who has the higher profile in the
region.
Temasek controls about 63 per cent of Singapore Telecommunication.
SingTel, in turn, holds about 20 per cent of Advanced Info Service.
AIS, which has a mobile-phone subscriber base of 19 million people,
is the cash cow of Shin Corp. With the small local market of only 4
million people in Singapore, SingTel needed to look elsewhere to
expand its business, such as Thailand and Australia.
It had long been looking to increase its stake in AIS or form a new
partnership with TOT Plc after the state telecom enterprise's
privatisation. The chairman of SingTel is Chumpol Na Lamlieng, the
former president of Siam Cement Group. Chumpol is the only
foreigner to serve as chairman of a large Singapore
government-owned company.
Temasek brought in the US investment banking firm Goldman Sachs to
advise it on the Bt150-billion takeover of Shin Corp. Goldman Sachs
had earlier advised Telenor of Norway on its takeover of United
Communication Industry, which operates the DTAC mobile network
here.
In Thailand, Temasek got in touch with Peter Seah Lim Huat,
a director of Siam Commercial Bank. Seah is a representative of the
Development Bank of Singapore, one of SCB's biggest
shareholders. Temasek in turn is a major shareholder of
DBS. Seah approached Vichit Suraphongchai, the executive chairman
of SCB, to take part in the deal. The major shareholder in
SCB is CPB Capital Co, an investment arm of the Crown Property
Bureau. Yos Euarchukiart heads CPB Capital.
Under the deal, Temasek would pay Bt73.3 billion to the Shinawatra
and Damapong families for their 49 per cent of Shin Corp. Temasek
would not use all of its own cash. It would borrow about Bt30
billion from the Thai market to finance the takeover. Chartsiri
Sophonpanich of Bangkok Bank was also interested in getting a piece
of the deal.
In the end, SCB would pitch in Bt15 billion in the form of a loan
to Temasek, with a guarantee from the Development Bank of
Singapore. Bangkok Bank would put up the other Bt15 billion.
Lending to Temasek was considered risk free because its credit
rating was higher than Thai sovereign debt. Temasek would bring in
Bt43 billion to complete the deal with the Shinawatra and Damapong
families.
Then Temasek would have to set aside another Bt79 billion to tender
for the remaining 51 per cent of Shin Corp as part of the
compulsory 100 per cent tender offer.
SCB Securities was also brought in to act as local financial
advisor for Temasek. ML Chayothid Kridakarn played a key role in
putting the deal together and ensuring that it conformed with Thai
regulations. For its
efforts, SCB Securities pocketed about Bt800 million from the
advisory deal.
Temasek set up Cedar Holdings
and Aspen Holdings in Thailand to help it acquire Shin Corp. Pong
Sarasin, a former deputy premier and a noted businessman, and
Suphadej Poonpipat were invited to join the deal so that it would
not look like an entirely Singaporean deal. They would be shareholders of Kularb Kaew, which
holds almost 41 per cent of Cedar Holdings. SCB would also hold 10 per cent of Cedar
Holdings.
Suvarn Valaisathien was also brought in to advise the Shinawatra
and Damapong families on the legal aspect of the
transactions. Suvarn was one of the lawyers who helped
Thaksin to defend himself against asset-concealment charges before
the Constitution Court in 2001.
With this who's who of Thailand's business world involved,
it is easy to understand why Temasek was certain about the Shin
Corp takeover. Thaksin, for his part, hoped that selling off Shin
Corp would end the criticism about his conflicts of
interest.
But the deal struck on January 23 immediately created an uproar.
Thaksin was accused of selling national assets to Singapore because
Shin Corp, through its affiliates, controls a mobile phone
concession, a satellite concession, a TV concession and aviation
rights. To make matters worse, his family paid no tax on the
deal.
His popularity sank fast, forcing him to dissolve Parliament and
call a snap election for April 2. Rallies are underway to oust
Thaksin and also to block the Shin Corp deal.
One of my friends, who is an investment analyst in Singapore, has
expressed concern about the threat by activists attached to the
People's Alliance for Democracy, which is rallying fiercely for the
unconditional resignation of Thaksin, to boycott Shin Corp
products.
My Singapore friend said: "The boycott of Shin products is
worrying. I can't speak for Temasek, of course, but my strong
feeling is that they will stay the course. They cannot be seen to
be giving in so easily the minute there is some problem with a
deal. I think their investment was based on a very positive
long-term view of Thailand's economy going forward and they will
probably be prepared to take the short-term pain.
"I would be very surprised if Temasek found other buyers and
unwound the deal completely.
"I am also worried about the impact this might have on bilateral
relations going forward. There is bound to be some bad taste left
after the current turbulence settles down. Nevertheless, the two
countries are drawn together by very fundamental common interests -
we are natural allies in Asean, both committed to open economic
policies and keen to see more economic integration. Both countries
worry about terrorism and are allies in that fight. And so on. This
natural friendliness and trust is seen in how SingTel wanted Khun
Chumpol to be its chairman - the only foreigner to be chairman of a
very large government-owned company. I hope that bilateral
relations will withstand this unpleasant period."
Keep a close watch now on how the Shin Corp deal proceeds. It will
be far from smooth.
Thanong Khanthong
