The sale of Shin Corporation: Just a rumour or a done deal?
By Jon Fernquest[Introduction|Vocabulary|Article]
[Reading Questions|Answers]
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Rumours are circulating that Mr. Thaksin will sell part of Shin Corporation to a foreign telecommunications company. While you read, try to define what, exactly, the rumour is. Here are some questions to guide your reading (See answers at end):
1. Which foreign company is going to buy Shin Corporation?After you understand the basic facts, look at the issues:2. Does this foreign company already own part of Shin Corporation?
3. Is the whole company being sold or only parts of it?
4. What is the rumoured price per share and value for the entire deal?
5. Why does this foreign company want to buy Shin Corporation?
6. What about access to 3G licenses?
7. Do experts believe a sale will happen soon or in the future?
8. Is there any hard evidence for the rumour?
1. Would this sale reduce conflict of interest allegations against Thaksin? For instance, in future bids to gain 3G concessions?2. Is selling his large corporation to a foreigner consistent with Mr.
Thaksin’s nationalism?3. Is selling the company a shrewd business move given the likely future liberalization of the Thai telecommunications market?
4. Will a foreign company be able to get the same telecommunications concessions that Mr. Thaksin was able to get with his friends and government connections? For instance, in future bids to gain 3G concessions?
Finally, for extra credit untangle the following brain teaser:
"Any sale of more than 25% would trigger a mandatory tender offer by the buyer, not just for Shin, but for other listed affiliates as well."
You might want to look at the Thai SEC’s rules for takeovers.
Bangkok Post Article January 16, 2006
Temasek Holdings-investment in ThailandMarket believes giant is in play despite lack of details
KOMSAN TORTERMVASANAUMESH PANDEY
Mystery still surrounds the future of Shin Corporation and whether Prime Minister Thaksin Shinawatra and his family are preparing to exit the company he founded 22 years ago.
Rumours that Mr Thaksin was near a deal to sell a 49% stake in the communications holding company to a foreign bidder have been circulating in the market for a month, despite denials by both the prime minister and Shin Corp.
Last week, the business daily Krungthep Turakij reported that Temasek Holding, the investment arm of the Singapore government, had sealed a $2-billion deal for Shin during Mr Thaksin's vacation in the island state. The price was said to be as high as 69 baht per share, well above Shin's last closing price of 45.25 baht.
Analysts say a share sale would help Mr Thaksin reduce persistent allegations that state telecoms policy has been skewed due to conflicts of interest.
Critics have maintained that government policy is biased to favour the business interests of the Shinawatra family, the wealthiest in the country in terms of stock holdings at more than 33 billion baht, according to a survey in December.
Besides Shin, Mr Thaksin's children, siblings and in-laws also hold large stakes in its mobile flagship Advanced Info Service, as well as Shin Satellite, SC Asset and other firms.
Others say that Mr Thaksin, as shrewd a businessman as any in Thailand, knows that competition in the telecom sector will only increase, and that the timing for a sale is good, as market liberalisation will only increase the advantage held by regional and global players.
For all of Shin's size, it is dwarfed by regional giants such as SingTel, Telenor or China Telecom, all firms with substantial stakes in the region.
Singapore Telecom, itself controlled by Temasek, already holds 19.26% in AIS and 1.08% of Shin, and has made no secret of its regional growth ambitions.
Sources close to the deal say negotiations have been complicated by the diversity of Shin's own assets, which include the consumer finance operator Capital OK and the budget airline Thai AirAsia.
SingTel and Temasek are likely to want only AIS. One option would be to break up Shin, selling the non-telecom assets.
The attractiveness of AIS, which commands 56% of the local market, depends in part on the prospects of landing a new 3G licence at a relatively low cost.
Another source said the deal is also complicated by Shin Satellite, a rising star following last year's launch of iPSTAR, the world's largest broadband satellite. With full commercial services starting this year, Shin Satellite projects 2006 revenues will double to 10 billion baht as a result.
Analysts, meanwhile, question the reported pricing of Shin at up to 69 baht per share as wildly overvalued.
``I don't think the share offering price would be much higher than the current market price, as in most other cases insider trading tends to push the shares up to the level at which the transaction would be executed,'' said Chirasit Vuttigrai, a telecom analyst at DBS Vickers Securities. He values Shin at 47 to 55 baht.
Monchai Mokaranuraksa, a telecom analyst at Tisco Securities, said that despite the lack of details, it was clear that the family was selling out, although to what extent remained uncertain. He said it appeared that the family wanted cash, while the buyer wants cash and a share swap.
``To me, paying 69 baht a share is like going overboard as our net asset value for the firm is just 50 baht apiece,'' Mr Monchai said, adding that any sale of more than 25% would trigger a mandatory tender offer by the buyer, not just for Shin, but for other listed affiliates as well.
``This would mean that the buyer would have to keep aside anywhere between $5 billion and $7 billion for the transaction, which to me looks highly unlikely,'' Mr Monchai said. ``I do expect a deal, but not anytime soon.''
Vocabulary (in discussion above)
Vocabulary (in the discussion above)
a done deal – negotiations have finished and an agreement has been reached
3G – third generation mobile phone technology, analogue mobile phones were the first generation and digital the second, the third generation will have high data speeds, always-on data access, and more multimedia services like video and high speed Internet access
consistent with – is possible to be true at the same time as, does not contradict
license – official permission for a company to do some business
concessions – special rights to do a business like telecommunications
a brain teaser – a problem that is difficult to solve and requires a lot of thought
the SEC – Securities and Exchange Commission, government agency regulating stock and bond trading
Vocabulary (in the article)
a stake – ownership of part of a business
to sell a stake in a business - to sell part of the business
is in play – the price of a security fluctuates because of takeover rumours
allegations – statements that someone has done something wrong
siblings – brothers and sisters
in-laws – parents and close relatives of your husband or wife, not blood relatives
a flagship company – the most important company in a group of companies
shrewd – able to understand a situation quickly and use this to your advantage
market liberalization – government regulation of a market becomes less strict and more freedom of action is allowed
dwarfed by – so much bigger that it makes the other one look very small (like a dwarf = very small person)
the prospects of – chances of being successful
selling out – selling everything you have, also can mean "to compromise one's integrity in exchange for money or other personal gain"
mandatory – required
tender offer – a public, open offer to buy stock from the existing stockholders of a publicly traded corporation under specific terms in effect for a specific period (See Wikipedia on tender offer)
listed – a company’s shares are traded on a stock exchange
affiliate - an organization that is officially connected with a larger organization
