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February 1, 2006 1:19 am

Ample Rich transaction raises questions

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In mid-December, Thailand’s newspapers started reporting what was to some a surprising rumour: the family of Thaksin Shinawatra, the country’s prime minister, was looking sell its entire stake in Shin Corp, the telecoms-to-aviation conglomerate the premier had founded before entering politics.

Over the next few weeks, Thai news stories about an imminent sale to Singaporean investors came thick and fast. The prospect of a deal helped propel Shin Corp’s share price up by 25 per cent. By January 20, the Bangkok Post reported that the family was to sell its entire 49 per cent stake to Temasek, the Singapore government’s investment arm, for just under Bt50 per share.

Yet throughout the weeks of frenzied speculation, Thai stock market authorities never suspended trading in Shin Corp’s shares. Their repeated requests for clarification from Shin Corp’s management were met with protestations of ignorance, while Mr Thaksin, and his eldest son, denied any knowledge of an impending takeover.

Temasek ultimately bought control of Shin Corp. from the Shinawatra family on January 23, paying the family Bt73bn ($1.87bn), all of which should be capital gains tax-free. But in the wake of the transaction, Thailand’s regulatory system is coming under hard scrutiny, with questions being asked about its lax disclosure rules and its commitment to protecting minority shareholders.

This week Thailand’s Securities and Exchange Commission asked Mr Thaksin’s children, Panthongtae and Pintongta to clarify their relationship with Ample Rich Investments, a British Virgin Islands company. Ample Rich, founded by Mr Thaksin, sold his children an 11 per cent stake in Shin Corp on January 20, just days before the take-over, reportedly for just Bt1 per share. Questions have been raised about the ownership of Ample Rich and why it would sell its Shin Corp stake to the premier’s children at a cheap price for later sale to Temasek.

Analysts say if Ample Rich had sold its shares to Temasek directly during the upcoming tender offer, it might have been liable to a 15 per cent withholding tax on the profits.

Kittiratt Na-Ranong, the stock exchange chief, declined a request for an interview. But Thirachai Phuvanat-Naranubala, secretary general of the SEC, told the Financial Times that the Shinawatra family members, as individuals, were under no legal obligation to disclose their intentions to sell their shares, nor did the market regulators have any authority to compel them to state their plans. “Legally speaking, there is no way we can force the company to know what the shareholders are going to do,” he says.

But while the Shinawatras appear to have conformed with existing disclosure law, analysts say the potential exit of a politically influential controlling shareholder was price-sensitive information that should ideally have been made known to all investors.

Analysts are also sceptical about whether Shin Corp’s management could have remained unaware of the impending sale. “The key objective of any regulator is to have a fully informed market, a fair and orderly market,” says a Bangkok-based merger and acquisition expert. “It seems extraordinary that in such a large takeover, the market wasn’t informed through formal sources.”

“I cannot believe any company in the equivalent position in New York or London wouldn’t have requested a suspension,” he says.

Investors are also grumbling about regulators’ approval for Temasek to launch a so-called ‘voluntary’ tender offer for Advanced Info Service (AIS), Thailand’s largest mobile phone operator, for a price of just Bt73 per share – a 30 per cent discount to the previously prevailing price.

The authorities also excused Temasek from launching tender offers for other listed Shin subsidiaries – iTV and Shin Satellite – offers that critics say should have been required by Thailand’s law. The SEC said yesterday that the price for the AIS shares, and the decision to waive tender offers for the smaller firms, were consistent with decisions taken in past.

Many Thais also object to the sale of Shin Corp to a foreign investor, an apparent violation of foreign equity limits in the telecoms sector. However, the structure of the deal means the company is still legally a Thai entity.

Thanong Bidaya, Thailand’s finance minister, said yesterday he saw no irregularity in the transaction.

The Shinawatra family is deploying its own representative, Suvarn Vlaisathien, a tax expert, to explain all aspects of the deal.

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