Shin Corp reported to the Stock Exchange of Thailand yesterday that it would this month spend Bt665 million to acquire 24.69 per cent of Capital OK from DBS Bank. Shin will buy 10 million shares from DBS at Bt66.50 apiece.

"This should enhance the group's synergy utilisation to strengthen Capital OK's presence in the consumer-finance market," Shin director Siripen Sitasuwan said in the statement. Formed in 2003, Capital OK - which has paid-up capital of Bt4.05 billion - is a joint venture between Shin and DBS that operates a consumer-finance business, including personal loans, sales finance and credit cards.

Shin owns 75.31 per cent of the JV, while DBS holds the rest.

A source close to the deal said Shin was likely to operate Capital OK on its own rather than selling shares to a partner.

"The country's changed political environment has made DBS sit back and revise its investment plan in Thailand," said a source at a local financial institution.

As a Singaporean state-owned bank, DBS is quite conservative in its overseas investment, she said, adding that DBS wanted to focus its investment mainly in TMB Bank, in which it has about a 16-per-cent stake and has more expertise.

Following the Capital OK share sale, DBS is expected to focus on providing consumer-loan products via TMB, the country's fifth-largest bank.

The source said DBS's exit from Capital OK was also aimed at avoiding any investment overlap with Temasek Holdings, the investment arm of the Singaporean government.

The sale of the Capital OK stake to Shin is considered a related-parties transaction because 28 per cent of DBS is held directly and indirectly by Temasek Holdings Pte Ltd, and Temasek indirectly holds 41.76 per cent in Shin through Aspen Holding Co Ltd.

The decision to pull the investment from Capital OK was made some time ago because DBS considered the unit's performance to be unsatisfactory, another source said. The company has recorded losses every year since it was established.

Capital OK announced a Bt1.55-billion increase in its capital to Bt4.05 billion on September 27. However, DBS declined to exercise its right to subscribe to the company's new shares, thus diluting its stake from 40 per cent to 24.69 per cent.

Following an earlier ill-fated investment venture, DBS's stake in DBS Thai Danu Bank was merged into TMB Bank in late 2004.

In the first quarter of 1998, DBS increased its investment in Thai Danu Bank - then renamed as DBS Thai Danu Bank - from a minority stake to about 52 per cent with an initial investment of Bt6 billion. In the second quarter of 1999 and in June 2000, DBS injected more funds into the bank.

When the Thai bank was merged into TMB Bank, DBS Group's stake in the new entity ended up at about 16 per cent.

Tanate Phutrakul, chief finance officer of TMB Bank, said DBS was unlikely to pull all of its investment from Thailand despite its decision on Capital OK.

DBS Bank recently exercised its right to subscribe to TMB Bank's capital-increase shares in order to maintain the level of its stake in TMB. But just how DBS Bank will make its expertise more beneficial to TMB is still unclear.

"There is no serious discussion yet between the bank and DBS on personal-loan stimulation. If DBS wants to support the bank more on this, then it will be good news for TMB," Tanate said.

Somruedi Banchongduang

 The Nation