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18 Oct 06
The Thai Commerce Ministry initiated a criminal investigation into whether the Foreign Business Act was broken through the use of nominees acting on Temasek’s behalf.
Any share sale by Temasek Holdings of its holdings in Shin Corp, would not affect an ongoing criminal investigation into whether illegal nominees were used to break the 49% foreign shareholding limit, according to the Commerce Ministry.
”A sale by Temasek allowing Thais to increase their shareholdings [in Shin] in the future would be a positive move. But regardless, the investigation into whether wrongdoing occurred will continue,” said Karun Kittisataporn, the ministry’s permanent secretary.
Singapore-based Temasek, in an open letter to the media, said on Monday that it wanted to keep Shin a listed company.
”We would like to reduce our shareholdings in Shin Corp at the appropriate time and in an appropriate manner to maintain an orderly market,” said Jimmy Phoon, a senior managing director of Temasek. He disclosed no details on the timing, price or size of any possible sell-off.
Shin currently has a free float of just 3.88%, well below the 15% minimum required by the Stock Exchange of Thailand. The company has until mid-2007 to amend its free float or risk possible delisting.
An increase in the free float could come through a sale in shares held by Shin or a public offering to dilute existing holdings.
Some analysts have speculated that a share sale could come as early as next month, as Temasek seeks to head off a high-profile investigation into Shin’s shareholding structure.
Temasek controls 42% of Shin directly through wholly owned Aspen Holdings, and also has an indirect stake through Cedar Holdings, which holds another 54.5% of Shin, according to the SET. Cedar is owned by Kularb Kaew, Siam Commercial Bank and Temasek.
Surin Uptakoon, a Thai businessman who is the major shareholder of Kularb Kaew at 68%, said Temasek had not mentioned the issue of a share sale.
”There haven’t been any discussions or consideration [of a sale],” he said.
Khunying Jada Wattanasiritham, the president and chief executive of SCB, also denied any knowledge of a sale of Shin shares by Temasek.
The prospect of a guilty verdict, which could result in jail, fines and even possible dissolution of the company or a revocation of Shin’s concessions, has taken a stiff toll on Shin stock over the past few months.
Analysts and fund managers said that given current market prices and uncertainties, a deal was unlikely to be concluded soon.
Adisorn Sermchaiwong, the president of SCB Asset Management, said that while Shin remained a very interesting stock, the pricing of any deal would determine the interest from investors.
Temasek, however, is unlikely to receive anywhere close to the 49.25 baht per share it paid during its takeover, he said, adding that the legal uncertainties should be addressed before any deal could be done.
Analysts say the ongoing investigations and court cases against the company are negative for Temasek’s divestment plans.
”If the government can assure that the court cases would be sorted out, then it is worth looking at, but otherwise, no deal will get done,” said a local analyst.
Richard Moe, a telecom analyst at Macquarie Securities, said one possible exit could be a state buyout of the stock.
”A potential solution could be to have TOT Plc and CAT Telecom take up the shares, and this could be a precursor to the future telecom sector reform that is set to take place,” he said.
Another option, Mr Moe said, would be a sale to a state-controlled fund such as the Government Pension Fund, Social Security Office or the Vayupak fund.