Controversy over the Temasek Holdings-Shin Corp Plc deal reached a new peak as an anonymous report speculated that Cypress Holdings, an indirectly wholly owned interest of Temasek, is the true financier of the deal. If this is proved true, it could substantiate public concerns that the buyer would need to relinquish power of “national assets”, particularly the television licence to Shin’s subsidiary – iTV Plc.

The two writers of the report, who claim to be securities analysts, raised doubts over the financial capacity of Kularb Kaew and Cedar Holdings to finance the deal on their own.

“It is a wonder how Cedar, which is registered with Bt160 million in capital, could find Bt56 billion to finance the deal. Moreover, Kularb Kaew with Bt100,000 in capital, holds a 41.1-per-cent stake in Cedar. That means the company needs more than Bt40 million to pay for the 41.1-per-share. Where’s the money coming from?” they wrote.

The buyers have not provided details about the money used to finance the deal. On January 23, Cedar and Aspen Holdings announced the Bt73-billion acquisition. While Aspen pumped in Bt16 billion, Cedar was responsible for the remaining Bt56.85 billion. And while Bangkok Bank and Siam Commercial Bank announced that they had lent Bt26 billion directly to Cypress – a major shareholder in Cedar – it is unclear where Cedar drummed up the remaining Bt30 billion.

The report said that Kularb Kaew itself would likely not be in a position to finance the investment considering its paltry registered capital.

“As shown in the funding diagram, it is clear that the true Shin buyer is Cypress, while Cedar and Kularb Kaew exist just to transform the nationality of the money to Thai sources. Practically speaking, both companies are not the true investors,” the report stated.

Kularb Kaew is believed to have been established just to make Cedar a Thai entity, with the local stake more than 50 per cent. Without Kularb Kaew, Cedar would be a foreign entity. Then, after the acquisition, Shin would in turn be majority-owned by foreigners, which would affect its subsidiaries that operate under licences or concessions, particularly  iTV. Under the Alien Business Act, the television business is restricted to Thais.

Confirming that was the voting rights structure of Kularb Kaew.

The report stated that though the company has seven shareholders, six of them, who are led by Pong Sarasin – Shin’s chairman – hold preferred shares with combined voting rights of only 9.4 per cent. This is despite the fact that they own 5,096 shares – or more than half of the concern’s capital.

Meanwhile, the other shareholder, Cypress Holding which holds 4,900 shares in Kularb Kaew – or a 49 per cent stake – holds 90.6 per cent of the voting rights.

Another point that led to the belief that Kularb Kaew is a nominee for Temasek is the condition that the firm pays out only 3 per cent of dividends to the six Thai shareholders.

“If you are a major shareholder in a company, would you write a regulation that will deprive you

of benefits? Nobody would do that in the normal business world. It can be assumed that what Kularb Kaew is doing contains something mischievous,” the report said.

Moreover, the company has three directors, two of who are foreigners: S Isawaran, Temasek’s managing director for investment, and Chai Yoo Choo. The third is Pong. And most of the controlling power is held by the foreign directors.

The report noted that being an alleged nominee, Kularb Kaew violates Article 36 of the Alien Business Law, because the Thai shareholders are allegedly in place just to help foreigners own shares in a restricted business over the statutory limit.

The Alien Business Law classifies local businesses reserved for Thais into three groups. The first includes businesses exclusively reserved for the Thais, including newspaper, radio and television broadcasting businesses.

Section 36 of the Alien Business Law also forbids Thai nationals or a Thai juristic entities from helping foreign investors operate businesses on the protected list.

If Thai nationals or juristic persons act as “nominees” for foreign investors in these kinds of businesses in order to help them evade the Alien Business Law, they can face imprisonment for a term not exceeding three years, or a fine between Bt100,000 to Bt1 million, or both.

“Though Temasek informed the Securities and Exchange Commission that it does not want to control iTV, it is undeniable that it is violating the law. Consequently, the court can order the Thai nationals or juristic persons to either stop providing such collaboration to the foreign investors or cancel their stakes in such protected businesses,” the report stated.

If it has been proved that Cedar and Aspen are all controlled by Temasek, meaning the 49.6-per-cent in Shin is actually owned by foreigners, not half Thai-half Singaporean as reported. This means that the foreign stakes in iTV is more than 50 per cent, given that Shin has a 53-per-cent stake in the television company.

To prove the theory, the writers also urged the Securities and Exchange Commission and the Anti-Money Laundering Office to probe the money trail to find out what roles Cedar, Kularb Kaew and Cypress are playing.

Yesterday, Democrat MP Kriengsak Charoenwongsak questioned the standards concerned state agencies used to determine the status of Thai companies. He said that the Commerce Ministry must decide whether iTV and Advanced Info Service Plc remained Thai entities now that Temasek Holdings held a major stake in Shin.