Published on January 20, 2006

Keep an eye on the takeover of Shin Corporation today or next Monday. After weeks of intense speculation, it is now certain that Temasek Holding of Singapore will buy a 49.6-per-cent stake in Shin Corp from the Shinawatra and Damapong families. At around Bt50 to Bt52 a share, this takeover deal will be worth about Bt75 billion, making it Thailand’s largest ever.

Bank of Thailand Governor MR Pridiyathorn Devakula hinted yesterday that the baht’s appreciation has been due largely to capital inflow to buy the Shin Corp shares. The baht soared to a nine-month high of Bt39.26 to the US dollar before falling to Bt39.40.

Since the beginning of the year, Singaporean banks have been aggressive buyers of the Thai baht in preparation for Temasek’s takeover of Shin Corp. Temasek will be required to make a tender offer for all the shares of Shin Corp after concluding the deal with the Shinawatra and Damapong families. This will require Temasek to set aside about Bt150 billion (almost US$4 billion) for the buyout.

Originally, the deal was to be announced on January 16 to coincide with the launch of Prime Minister Thaksin Shinawatra’s reality television programme in Roi Et’s At Samat district. The reasoning behind the timing was that the reality show would, to a certain degree, serve to overshadow the takeover deal. But somehow the announcement could not be made, probably due to ongoing negotiations regarding the final price of the deal, which had yet to be settled.

Temasek could pay the Shinawatra and Damapong families with its holdings of Singapore Telecom’s shares. This means that the Shinawatra and Damapong families will have to set up a company or a fund, which will hold a 10-per-cent share in SingTel. The money then can be safely kept in Singapore without having to be brought into Thailand.

In the future, the families can invest in any stocks in Thailand or elsewhere without having to worry about the glaring eyes of the Thai public. In short, the Shinawatra and Damapong families are going global in this latest phase of their wealth management.

One financial adviser likens the Shinawatra family to a fully-grown duck that is now swimming into a larger river in search of a larger world after living most of its life in a small pond.

There are three reasons behind the Shinawatras’ decision to part with its flagship company, Shin Corp, which controls Advanced Info Service, AirAsia, Capital OK, Shin Satellite, iTV and others.

First, now is the perfect time to sell the business because its price has peaked. The Benjarongkuls have shown the way by selling their United Communication Industry Plc to the Norwegian telecom giant Telenor. If the Shinawatras do not sell their business now, they might find it difficult to sell it later on. The window of opportunity for selling a business on this gigantic scale can only come once in a lifetime.

Second, Thaksin would like to rid himself of the negative image he has had involving a perceived conflict of interest linked to Shin Corp. One of the political attacks against Thaksin is that Shin Corp has been benefiting indirectly from government policy. Going forward, keeping Shin Corp would become a political liability for the Thai Rak Thai Party.

Third, the telecom industry is facing liberalisation and deregulation under the World Trade Organisation’s global trade liberalisation. This process is inevitable. Thailand’s planned free-trade agreement with the United States will also accelerate further liberalisation of the telecom industry. The Shinawatras realise that they are no match for other global players with deep pockets. Advanced Info Service would also find it difficult to win a 3G licence without facing political attacks. Selling Shin Corp would help reduce this political pressure.

If this share-swap transaction between Temasek and the Shinawatras and Damapongs really happens, then a lot of people will be raising their eyebrows. That is because the Thaksin government has been trying to promote foreign investment in the Thai stock market, but the Shinawatra family is going to move most of its assets or wealth to Singapore.

Equally puzzling is the Thaksin government’s opposition to the listing of Thai Beverage Plc, the brewer of Chang beer, in the Thai stock market. If listed, Thai Beverage would command a market capitalisation of Bt200 billion to Bt300 billion. Charoen Sirivadhanabhakdi, the liquor tycoon, sent a clear message that if he did not receive a listing in Thailand, he would go somewhere else. Charoen was left with no choice but to go to Singapore. Again, you can see that Thai wealth – let’s forget the social argument involving the selling of alcoholic beverages for the moment – is being shifted to Singapore en masse.

This amounts to mixed signals being sent out by the Thaksin government, which recently began organising the Thailand Grand Sale to attract foreign investors to all of the Kingdom’s strategic industries including culture, transport, tourism and defence. The only thing to do is keep your eyes open. Don’t blink.

Thanong Khanthong

The Nation

Post your comment to this story here