Who is responsible for Thai political crisis ???

[kueytoc]

By John Burton in Singapore, FT

Wed Sep 20, 10:35 AM ET

Singapore could suffer the most among countries in the region from the military coup against Thaksin Shinawatra, the Thai prime minister, who forged close ties with the city-state and sold his telecommunications group to Singapore's state investment company.

It was the $1.9bn sale of a 49 per cent in Shin Corp by Mr Thaksin's family to Temasek Holdings in January that triggered the political crisis that led to the coup after it was revealed the family paid no taxes on profits from the deal.

Mr Thaksin was seen by Singapore as its strongest supporter for closer economic integration of the Association of South-east Nations, which provoked talk of a Singapore-Bangkok axis within the group.

The ousted Thai leader also expressed admiration for Singapore's political system, telling Singapore officials that he wanted to model his Thai Rak Thai party on the long-ruling People's Action party.

Mr Thaksin decided to sell Shin Corp to Temasek to dispel allegations of conflicts of interest between his family's corporate holdings and his government duties as he prepared to stand for a third term as prime minister.

The deal turned out to be the most controversial conducted by Temasek since Ho Ching, the wife of Singapore's prime minister, became the group's chief executive in 2002 and launched an ambitious global acquisition strategy.

Public protests in Thailand over the deal have led to a nearly 40 per cent fall in Shin Corp's share price since then. In April, Lee Hsien Loong, Ms Ho's husband, told parliament that "Temasek invested in Shin Corp because it saw value in the investment" but added it was not government policy "to second guess Temasek's risk assessments".

A former senior Singapore official, however, criticised Temasek's handling of the deal in light of Mr Thaksin's growing unpopularity at the time. "Temasek did financial due diligence, but not political due diligence," he told the Financial Times. Temasek said it had considered all aspects in concluding the deal.

A Temasek-led consortium increased its stake to 96 per cent in Shin Corp under a mandatory offer, but the takeover has been investigated by Thai regulators over whether Temasek used proxy companies to avoid a 49 per cent ceiling on foreign ownership in strategic industries. Temasek said it fully complied with Thai law.

Michael Montesano, a Thai specialist at the National University of Singapore, believed it was unlikely a new government would nullify the Shin Corp deal, but Temasek might have to reduce its stake if it was found in breach of foreign shareholding limits. Temasek said it was premature to comment on the coup's impact.

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OUCH !!!...

Looser Temasek set to lose S$850 Million

Published Wednesday, October 18, 2006 by Singapore Election.

Siriporn Chanjindamanee

Petchanet Pratruangkrai

The Nation

Loss of Bt20 bn predicted, if buyer can be found

Singapore state investment firm Temasek Holdings stands to lose more than Bt20 billion if it were to sell off its controversial majority holding in Shin Corp, financial experts believe.

Brokerage analysts said Temasek, which controls about 96 per cent of Shin Corp, might have to sell up to 47 per cent of the company, or 1.5 billion shares, to resolve the foreign ownership dispute.

Thai law restricts foreign interests in Thai firms to below 50 per cent, so Temasek must reduce its holding by 47 per cent to meet the 49 per cent limit.

The 47 per cent stake in Shin Corp is now worth a market price of Bt52.32 billion, compared with Bt74.14 billion in January this year - a loss for Temasek of more than Bt20 billion.

On Monday, Temasek issued a statement to clarify its willingness to reduce its holding in Shin Corp at an appropriate time to ensure an orderly market. However, it has not yet addressed the question of whether it breached Thai law by allegedly relying on nominees to take over Shin Corp.

A fund manager said Temasek might want to complete the share sale in November, before a court verdict on whether to revoke the licences of Shin Corp subsidiaries due to Temasek's alleged violation of foreign ownership law.

But other analysts believe Temasek might find it very difficult to find potential buyers.

"Temasek is looking for potential buyers but it may not be able to conclude the deal by November because it involves lots of money," said an analyst.

He said only a handful of Thai companies such as Siam Cement, Charoen Pokphand (CP) and Thai Beverage Plc have enough cash to acquire the Shin Corp stake.

However, Thai Beverage is unlikely to buy Shin Corp shares because its chairman Charoen Sirivadhanabhakdi is reluctant to get involved in political issues. CP is also unlikely to spend a huge amount of money on such a move, said the source.

Now, the focus is on Siam Cement and Siam Commercial Bank (SCB), both partially owned by the Crown Property Bureau. But the source quoted a senior official at Government House as saying Siam Cement or Siam Commercial Bank's buying into Shin Corp "could never happen".

SCB has an indirect interest in Shin Corp, but Khunying Jada Wattanasiritham, the bank's president and CEO, said "there's no reason for SCB to buy more Shin Corp shares".

Korn Chatikavanij, deputy secretary-general of the Democrat Party, also discounted the possibility of Temasek finding any Thai buyer for its Shin Corp stake in the near future.

"Who would want to step in now? There are several contentious legal problems surrounding Shin Corp. Not to mention the case against Shin Corp at the Administrative Court," he said.

Temasek bought 49 per cent of Shin Corp from the Shinawatra and Damapong families in January this year. In a subsequent public tender for the remaining shares Temasek, through Cedar Holdings and Aspen Holdings, snapped up almost everything and ended up controlling 96 per cent of the Thai company, leaving just 4 per cent as a free float.

Temasek's senior managing director Jimmy Phoon said in a statement on Monday the share reduction plan was part of his company's original intention, to maintain Shin Corp's listing status on the Thai stock market following Temasek's public tender offer in March. But he did not say how many shares it planned to sell to keep the stocks liquid in the market.

Seamico Securities Plc said the sale was inevitable. It predicted Temasek might have to sell 51 per cent to reduce the risk from the nominee controversy.

An analyst from Asia Credit Securities said Phoon's announcement was good news. "It should promote the free float of Shin Corp shares on the market and reduce foreign investors' worries on the future operation of Shin Corp," he said.

Local telecom operator Advanced Info Service (AIS) has 48.3 per cent of its shares held by foreigners. If foreign shareholders in Shin Corp are included, the foreign stake in AIS would be 91.1 per cent, much higher than the legal limit of 49 per cent.

"If Temasek wants to reduce Shin's foreign shareholders to 49 per cent, it has to sell around 1.547 billion shares," the analyst said.

"Now we have to see if Temasek sells the shares to institutional investors or to retail investors. And what will the conditions be for the sale," he queried.

Meanwhile Karun Kittisataporn, permanent secretary of the Commerce Ministry, said in spite of Temasek's intention to sell its stake, the ministry will continue with its legal action to follow up the Business Development Department's investigation on whether Kularb Kaew is a nominee of Temasek.

"It was a separate issue. The ministry will proceed with the case," he said.

Last month, the ministry concluded its investigation, finding that Kularb Kaew was a nominee of Temasek Holdings. The case was handed over to Tung-Mahamek police station. In the primary investigation, the department found it likely Kularb Kaew was in breach of the kingdom's Foreign Business Act.