Mystery deal gets even murkier

opinion January 11, 2013 00:00

By Thanong Khanthong

9,769 Viewed

Temasek Holdings, Singapore's state-owned investment company, appears to be on course to divest its controversial holdings in Shin Corp. You might recall that the Shin Corp deal in 2006 led to a yellow-shirt revolt against Thaksin Shinawatra. The military


It emerged on Wednesday that Temasek and its partners in Cedar Holdings Ltd sold 330 million Shin Corp shares at Bt63.25 apiece for a total of Bt20.87 billion. The price was a 5.6 per cent discount on Shin Corp’s Wednesday close at Bt67. But the buyer or buyers remain a mystery. The Shin Corp shares have disappeared into Thai NVDR Co, set up by the Stock Exchange of Thailand to help investors circumvent foreign ownership rules. NVDR holders have no voting power, but they enjoy similar dividend payouts and other benefits with other shareholders. NVDR is an excellent sanctuary, with official blessings, to help big-time investors hide their identities behind a smoke screen.
As a result of this transaction, Cedar Holding’s stake in Shin Corp fell from 23.3 per cent to 13.3 per cent. It should be noted this marks a second time Cedar Holdings has embarked on a major divestment of its Shin Corp shares. Shin Corp controls mobile phone operator Advanced Info Service, satellite operator Thaicom and other assets. In August 2011, Cedar Holdings, which originally held 31.5 per cent in Shin Corp, sold off 7.9 per cent to reduce its stake to 23.6 per cent. Guess what? The buyers were also the mysterious investors taking sanctuary in Thai NVDR.
To put things into perspective, Temasek’s lawyers set up Cedar Holdings and Aspen Holdings to take over Shin Corp from the Shinawatra family. Thaksin, then prime minister, had been afraid of running into political trouble because of his business interests (AIS and Shin Satellite, later renamed Thaicom) linked to government concessions. Thai law prohibits public office-holders from having any financial or business interest in government concessions. Thaksin and his wife, Pojaman, transferred their holdings in Shin Corp to their three children, Banaphot Damapong and Yingluck Shinawatra, the current prime minister, before Thaksin formally entered politics in 2001 to form the Thai Rak Thai Party.
Through Cedar Holdings and Aspen Holdings, Temasek, which managed US$161 billion of assets as of March 2012, acquired 49 per cent of Shin Corp for Bt73 billion at Bt49 a share. But the securities law required Temasek to mount a 100-per cent tender offer to allow minority shareholders to sell their shares. Temasek swallowed up 96 per cent of Shin Corp, with its proxies Cedar Holdings taking 31.5 per cent, Aspen 42 per cent and others the remainder.
But the problem arose with the Shin Corp deal. Thai law does not permit foreign entities to hold more than 49 per cent in Thai firms. Temasek’s takeover of Shin Corp broke through the roof, soaring to 96 per cent. Apparently, Temasek set up nominees to circumvent the Thai foreign ownership law. Through zig-zag transactions, the Shinawatras did not pay any tax from the sell-off of Shin Corp. This prompted the yellow shirts, under Sondhi Limthongkul, to stage a political rally, accusing Thaksin of selling Thai assets on the cheap to foreigners. The crisis dragged on until the military staged a coup to oust Thaksin from power in September 2006.
After the deal, the Shin Corp shares headed downward. Temasek was reluctant to unload its holding even though there was almost no free-float stock left. Prime ministers came and went in a hurry. General Surayud Chulanont headed a military-appointed government, followed by Samak Sundaravej, Somchai Wongsawat and Abhisit Vejjajiva. Yingluck won the election in 2011. 
During this uneven period in Thai politics, the Commerce Ministry launched a probe into alleged violation of the Foreign Business Act by Temasek. Cedar Holdings would pose more of a problem than Aspen Holdings. The major shareholders of Cedar were Siam Commercial Bank, the main advisor on the deal; Kularbkaew Co; and Cypress Holdings. Thai elites were shareholders in Kularbkaew, chairedby Pong Sarasin, a former deputy prime minister. Cypress Holdings was totally under Temasek’s control.
The case went to the police, who did nothing. They simply sat on the case. Pong afterward resigned as chairman of Kularbkaew. With the ensuing political violence, the Shin Corp deal broke to the surface from time to time. Thaksin, who had left the country, and Pojaman were subject to a corruption probe. During the Abhisit government, the Supreme Court ruled that Thaksin and Pojaman had been owners of Shin Corp all along and the concessions of their business amounted to a conflict of interest; Bt46 billion of their assets were seized by the state.
With the latest transaction, Temasek’s holding in Shin Corp has fallento 52 per cent – 10.3 per cent via Cedar Holdings and 42 per cent via Aspen Holdings. It should be noted that Aspen’s stake in Shin Corp has never been divested. Between 2006 and now, Temasek has garnered more than Bt225 billion in dividends, capital gains and other benefits from its investment in Shin Corp. The share price of Shin Corp is now hovering at Bt65-Bt66.
We don’t know the identities of the buyers of Shin Corp stocks from Temasek. Neither can we ascertain whether the Shinawatras are attempting to buy back Shin Corp. Some have gone as far as to speculate that the Shin Corp deal never took place – it was only a temporary swap of assets between Thailand and Singapore. With this, the Shin Corp deal remains shrouded in mystery.