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January 24, 2006 9:08 pm

Thailand probes Shin Corp sale

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Thai stock market authorities have launched a probe into possible insider trading in connection with Temasek Holding’s $1.9bn takeover of Shin Corp, the conglomerate founded by Thaksin Shinawatra, the Thai prime minister.

Mr Thaksin’s family on Monday sold its 49.9 per cent stake in Shin Corp to Temasek in Thailand’s largest foreign takeover.

For weeks before the long-rumoured sale, Shin Corp’s management, Mr Thaksin, and his son publicly denied knowledge of any potential takeover, even as talk of a deal sent Shin Corp’s share price up by 25 per cent.

The sequence of events has renewed questions about Thailand’s corporate disclosure rules and authorities’ commitment to protecting minority shareholders.

One Bangkok-based merger and acquisition expert said: “It is just incredible that the largest deal in the history of the country can go on without an announcement. It’s a very poor comment on corporate governance.”

Lawyers advising the parties, and Thai market authorities, said the Shinawatras, as owners of listed shares, had no legal obligation to disclose their intentions to sell before completing the transaction.

Edward Koehler, managing partner at Hunton and Williams, which advised Temasek, said: “This was not an action taken by the company; it was an action taken by the shareholders of the company. The fact that the shareholders were related to a public figure doesn’t change the rules.”

But while the Shinawatras may have conformed with the letter of Thai law, analysts said they, or company management, should have been pressed for comment, particularly as details of the deal were leaking into the market.

Robert Penaloza, of Aberdeen Asset Management, said: “The question is how many people really knew, and did they take advantage of that information?”

Stock market authorities repeatedly asked Shin Corp to clarify rumours of the takeover – mostly recently last week, after Pridiyathorn Devakula, central bank governor, attributed recent appreciation in the Thai baht to foreign currency inflows to finance the deal. But Shin simply reiterated that it had no information from its leading shareholders about any imminent sale.

Korn Chatikavanij, an opposition MP and former managing director of JPMorgan Securities (Thailand), this week expressed doubts about whether Shin Corp’s top management could have remained entirely unaware of the impending takeover.

Thirachai Phuvanat-Naranubala, head of the Securities and Exchange Commission, said stock exchange authorities had to work with the company to find out exactly when shareholders told its management of the impending deal.

Stock market authorities are also investigating five brokerages, and other parties, for possible insider trading in connection with the deal, although Mr Thirachai called the probe “standard procedure”.

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