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The Sale of Shin Corp

Updated On: Jan 27, 2006

Some call it `the largest corporate deal in Thai history'.

On 23 Jan 2006, Temasek announced it was spending 73.3 billion baht, or 49.25 baht per share, to buy out the 49.6% stake in Shin held by the Shinawatra and Damapong families. But this seemingly “commercial” deal however has turned into political firepower for Thaksin's critics.

Shin grew from a computer business Thaksin and his wife Potjaman set up in 1983. Along with satellite and mobile telephone licences, Shinawatra Computer and Communication became Thailand's biggest telecommunications company and changed its name to Shin Corp in 1999. Shin Corp shares have tripled in value since Thaksin assumed the position of Prime Minister five years ago, and while telecomunications make up 90% of its business activities, the company had diversified into budget airlines (Thai Air Asia), financing and broadcasting iTV of late. Shin Corp's net income in the third quarter of last year was 1.98 billion baht.

Temasek borrowed 11 billion baht from Siam Commercial Bank and another 14 billion from Bangkok Bank to help finance the transaction with the remaining funds obtained through overseas loans and SCB Securities as an adviser for the transaction. With the deal, the Shinawatra family will exit the telecom business and the family's stock holdings will be consolidated around the SET-listed property developer SC Asset.

Most credit agencies are optimistic about the deal, and Moody's investors Service and Standard and Poor's both gave the thumbs up to the purchase.

However, while the deal seems to make commercial sense, and a win-win deal for both Temasek and Thaksin, it has given rise to severe criticisms from many quarters in Bangkokjudging from the deluge of articles in The Bangkok Post and The Nation. Charges of insider trading, criticisms about the sale over the Stock Exchange which allowed Thaksin to avoid paying capital gain tax, etc were insinuated in several of the articles. Some have even gone as far as to raise concerns about “threats to national security, economic security and media independence.” As reported in an article in Bangkok Post immediately after the sales, academics and political observers expressed fear that “sale of radio frequencies and satellite broadcasting” would “jeapordise … national security”. Concerns that theSingaporegovernment could influence the content of Shin Corp's iTV channel were also raised in another article in The Nation.

The Prime Minister himself has come up personally to defend the deal. He stated that the sale by his family was his children's idea and that they did that to protect him from allegations of conflicts of interest and allow him to devote himself completely to politics. In addition, Thaksin stated that they might allocate some of their profits to charity. Thaksin also attributed the sale to globalization and economic rationality. "Foreigners hold shares through investment funds, but the management is still under the original Thai team. It will not have any impact," Thaksin told reporters. "And it goes vice versa. Thais are also investing in other countries. It's globalization".

Temasek is also upbeat about the deal. Mr Iswaran, the managing director for investments at Temasek Holdings, said the operations at Shin and its subsidiaries would remain unchanged. ''We have great confidence over Shin's strong management teams and employees, with no plans to restructure or divest Shin's non-core telecom subsidiaries.” Mr Iswaran told The Straits Times 'We have done this deal on a purely commercial basis. Our focus has only been on the value proposition and whether it makes sense for Temasek.' In fact, Temasek released a statement: 'Upon completion of the transaction, Shin Corp will remain a majority-owned Thai company.' Temasek has a history of non-interference from the government since inception. 'Singapore Inc' brand is now a regionally known entity with a reputation for fairness, stability in investment, honesty and trust, good corporate governance as well as a long-term commitment. GLCs are at the forefront of this branding.

Sources:

*Backman, Michael, “Thai PM rings up a billion reasons for family affair” dated January 25, 2006 [downloaded on 25 Jan 2006], available at http://www.theage.com.au/articles/2006/01/24/1138066792235.html

*Bangkok Post, “AIS 'assured' 3G licence - Lynchpin of Temasek buyout of Shin Corp” in the Bangkok Post website [downloaded on 26 Jan 2006], available at http://www.bangkokpost.com/News/26Jan2006_news01.php

*Bangkok Post, “Being economical with the truth” dated 25 Jan 2006in the Bangkok Post website [downloaded on 25 Jan 2006], available at http://www.bangkokpost.com/News/25Jan2006_news15.php )

*Bangkok Post, “PM: Shin sale my kids' idea” at the Bangkok Post website [downloaded on 25 Jan 2005], available at http://www.bangkokpost.com/News/24Jan2006_news01.php

*Bangkok Post, “Shin sale draws more flak - Thaksin: It's just envy ...I'm not a nobody” in the Bangkok Post website [downloaded on 26 Jan 2006], available at http://www.bangkokpost.com/News/26Jan2006_news06.php

*Bangkok Post, “TELECOMMUNICATIONS / SHIN CORPORATION TAKEOVER It's official: Shinawatras net B73bn Tender rules eased, no tax liabilities” in the Bangkok Post website [downloaded on 25 Jan 2006], available at http://www.bangkokpost.com/Business/24Jan2006_biz20.php

*Chitsomboon, Ploy, “Shin uncertainty makes for sluggish trade” in the Bangkok Post website [downloaded on 25 Jan 2006], available at http://www.bangkokpost.com/Business/25Jan2006_biz34.php

*CNA, “Thai PM defends Shin Corp sale, hints at third term” in the CNA website dated 24 Jan 2006[downloaded on 25 Jan 2006], available at http://www.channelnewsasia.com/stories/afp_asiapacific_business/view/189759/1/.html

*Ghosh, Nirmal, “Thaksin's family sells Shin stake to Temasek - $3b deal is seen as a win-win for both the Thai PM and Temasek Holdings” dated 24 Jan 2006 in the Straits Times website [downloaded on 25 Jan 2006], available at http://www.straitstimes.com/sub/storyprintfriendly/0,5578,366784-1138139940,00.html?

*Straits Times, “SingTel, PSA rated tops for creditworthiness” in the Straits Times dated 8 Nov 2001, [downloaded on 23 Jan 2006], available at http://it.asia1.com.sg/newsarchive/11/news007_20011108.html