MATICHON TAKEOVER: Adversaries begin the money game

Published on September 15, 2005 - Many say Khanchai is far from defeated. The money game will prove to be the decisive factor as Paiboon Damrongchaitham and Khanchai Boonpan head into a battle for control of Matichon Plc. Paiboon, chieftain of GMM Grammy Plc, can easily outbid Khanchai, founder of Matichon, because his net worth is at least Bt10 billion.

Khanchai, still shocked by Paiboon’s hostile bid for full control of Matichon, is now looking for financial advisers to help him ward off the entertainment tycoon’s takeover bid.

Paiboon and GMM Media Plc (GMMM), a subsidiary of GMM Grammy, have raised their stakes in Matichon to 32.23 per cent by spending around Bt733 million. They say they want to buy all Matichon’s shares.

Accordingly, GMMM plans to tender for a further 87.69 million shares – or a another 42.78-per-cent shareholding – at an estimated cost of Bt973 million. To finance the deal, it has secured a Bt2.2-billion bridging loan from Siam Commercial Bank.

Paiboon said he himself would buy any available shares beyond this accumulated 75-per-cent shareholding.

At the same time, Khanchai has been able to muster shareholders’ support, representing about 31 per cent of shares.

In order to raise his stake in Matichon by another 20 per cent, he will need to find at least another Bt500 million to Bt600 million.

“I believe that Khun Paiboon must have amassed more than a 50-per-cent stake in Matichon, otherwise he would not have looked this confident about his move,” said an investment banker who asked not to be named.

“Khun Khanchai appears to be at a disadvantage, because if he were to fight head-to-head against Khun Paiboon for the shares of Matichon, he would end up spending lots of money. Does he have the money?”

It seems Khanchai’s potential counter-bid has also buoyed market activity in Matichon shares. There was a major transaction yesterday for 800,000 shares at Bt16 apiece. On the foreign board, the price closed at Bt16.50.

Another investment banker, who asked not to be named, said Khanchai had an advantage over Paiboon because he was on Matichon’s executive board, meaning he knew all the company’s inside information.

“He should appoint a financial adviser and launch a counter bid. Small shareholders will have to decide which party they want to sell their shares to,” he said.

A lawyer well versed in takeover deals said Paiboon must have thought it over thoroughly before launching the takeover bids for Matichon and Post Publishing.

“He always uses the best people around to help him with advice. His lawyers and financial advisors are all heavy-weight people,” said the lawyer, who knows Paiboon well.

“At this point, both sides will have to look for their allies. Whether Khun Khanchai gets support from allies or not will depend on his performance in running Matichon and whether he has looked after the shareholders well enough.”

But Korn Chatikavanij, the Democrat MP and former chairman of investment bank JP Morgan (Thailand), believes Khanchai should adopt a wait-and-see position.

“He can afford to sit idly. Given that Matichon’s market price is nearly Bt14 a share, I doubt if many shareholders will be interested in selling to GMM Grammy at a tender price of Bt11.10,” Korn said.

He also recalled the failures of many companies in the past when they launched tender offers to buy more shares from small shareholders.

Unlike developed markets, only a handful of shares are in the possession of small shareholders in Thailand, he said, adding that in the past no firm has succeeded in acquiring more shares through tender offers.

Korn said Paiboon was in a tough position because the chances of a successful tender offer looked bleak. And despite his stake, which gives him veto rights, he could not interfere with editorial policy, he said.

“Indeed, he promised not to introduce changes to the editorial department. We have to honour his words,” he said.

A banker, who requested anonymity, said that if Khanchai chose not to tender for more shares, he should send a message to the public that the company was in financial trouble and that employees were ready to resign en masse.

That would result in the firm’s share price falling, and although that would make Paiboon’s offer more attractive, Khanchai would have the chance to buy shares at a cheaper price, he said.

“A newspaper’s value lies in human resources,” the banker said. “If Khanchai doesn’t mind leaving the brand, he could unload his stake and collect some Bt600 million.

“That’s enough to launch a new newspaper, which would surely draw readers who honour the value of the editorial team – not the name of the newspaper.”

Another banker said Khanchai was not yet defeated. He said the publisher could go to any financial institution for a loan to buy another 20-per-cent stake in the firm to give him a majority stake.

If they are confident in his ability to repay the loan, they should lend him money, he said.

“I don’t think there is anything going on behind the scenes about Siam Commercial Bank’s lending to Grammy. But I’m not sure about Grammy being a proxy for politicians who want to quell critical reports,” said the banker, who asked not to be named.

Kim Eng Securities (Thailand) is acting on behalf of Grammy to buy shares from other shareholders.

Meanwhile, Kongkiat Opaswongkarn, president of the Federation of Thai Capital Market Organisation, said GMM Grammy’s effort to take over Matichon was a normal investment activity.

He advised executives to read a text book on how to defend their companies against takeovers.

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