Following the Shinawatra and Damapong families’ sale-off of Shin Corp Plc, the Securities and Exchange Commission (SEC) has been strongly criticised for being too lenient with Temasek’s request to waive the tender-offer requirement. Below, SEC assistant secretary-general Chalee Chantanayingyong explains the deal from the securities watchdog’s point of view.

Can you explain why the SEC didn’t require Temasek to do a tender offer for Shin Corp’s subsidiaries?

Korn Chatikavanij [Bangkok Democrat MP and former managing director of JP Morgan Securities (Thailand)] asked the SEC the same question on Monday, when I told him we granted the waiver decision in a straightforward manner, based on the facts. The Chain-Principle category was drafted in 2001-02 and enforced from 2003. In fact, the decision whether to grant the waiver is not up to the SEC, or even the SEC secretary-general. We had no authority to decide. The decision is up to outside experts on the takeover panel.

Who set up the takeover subcommittee and how many people were involved in the consideration?

The SEC uses outsiders, because it requires a thorough consideration and fair judgement about whether to provide a waiver for the tender offer for any takeover. We were concerned that if the SEC itself considered the approval, people would have questioned the decision.

Amorn Chantrasomboon drafted the guidelines for the subcommittee, divided into three groups. The first group is a subcommittee consisting of Panas Simasathien, Sompol Kiatphaibool and Vasant Thienhom. The second group consists of financial and legal experts. And the third consists of SEC staff. Each group has five members, rotated in alphabetical order. Korn used to be a panel member.

What did the SEC think of this waiver case?

When SCB Securities came to SEC to seek the waiver based on the Chain Principle category, the subcommittee and myself didn’t want to get involved in the consideration. And we didn’t want to grant the waiver either, because this case had been closely watched by the public, and we were aware there would be many questions. So it took a long time to discuss the matter with the financial advisers.

Now people think that the permission to allow Temasek to exercise the waiver was unfair to small investors.

You have to understand that the guidelines that come with a takeover deal have two objectives. The first one is to protect small investors, so they’re not taken advantage of by the new buyers. Second, the guidelines should look at the takeover but not be too rigid to obstruct the new buyers. Sometimes, the old management takes advantage of the small investors. Thus, we should let the new investors in.

What are the reasons behind the waiver decision?

The takeover guidelines have opened an opportunity for new investors to waive the tender-offer requirement in the acquired firm’s subsidiaries, even though the shareholding portion (in the subsidiaries) may reach the trigger point. However, it must be proved that the subsidiaries are not the main targets for the investment. In case of Shin Corp, Temasek targeted Advanced Info Service, even though its shareholding proportion in Sattel and iTV might have required the company to do the tender offer. But based on internationally accepted standards like sales or income, net profit, total assets and market capitalisation, both companies contributed 5-18 per cent of Shin’s revenue, in contrast to the tender-offer standard rule of 50-60 per cent.

Shin is not the first case in which the subcommittee decided to grant a waiver. So far, five companies have applied to exercise the waiver right. The subcommittee granted waiver approval to Thai Carpet Industry after TMB merged with IFCT [Industrial Finance Corp of Thailand], because the subsidiary was not the main target in the takeover, and it could be proved that it had little significance to the parent company. Moreover, there were N-Park and Syntec, including Swedish Motors and Scandinavian Leasing.

One case in which we refused to grant the waiver was SCC [Siam Cement Co], which took over TPC [Thai Plastics and Chemicals Plc], of which NPC [National Petrochemical Plc] is a subsidiary. Because it couldn’t be proved that NPC was not the main target for the takeover, since SCC was in the same business as NPC.

People questioned why the tender-offer price of Bt72.13 a share was much lower than the market price.

I myself also questioned why the tender-offer price under the Chain Principle was so low, compared with the market price. However, the price-determining criteria did not apply the market price as the reference price. The selling price was used as the reference. For the tender-offer price of Bt72.13, the SEC didn’t receive any such price in the first place.

The financial advisers explained the source of the price. They applied the standards in Singapore, Hong Kong and the UK to set it. I looked into it. And we checked with the SEC in Hong Kong to confirm whether the price-setting procedure was in line with the international standard. And we got confirmation that it was in line with the international standard.

The SEC must bear in mind transparency and fairness for all parties. You can see that we didn’t follow the financial advisers all of the time. On the contrary, there was a lot of debate, and we accepted the price because the financial advisers made available the evidence and references to us, in accordance with the standard. So we had no reason to object to the tender-offer price of Bt72.13.

Siriporn Chanjindamanee
The Nation