ShinCorp/ShinSat

[Tettyan]

...continued from previous post

Originally Posted by Stock Exchange of Thailand

...

3) Registered capital is Baht 400,000,000


Aspen

1) Name of directors and authorized signatories
1. Mr. S Iswaran
2. Ms. Tan Ai Ching
3. Ms. Chai Yue Joo
Authorized signatories are "1. Mr. S Iswaran, Ms. Tan Ai Ching and
Ms. Chai Yue Joo, any two of these three directors can sign jointly
with affixing the Company's seal. 2. One director can sign with
affixing the Company's seal on the required documents which
need to submit at the Ministry of Commerce and the Revenue
Department"

2) Name of major shareholder is Anderton Investment Pte. Ltd.
Holds 99.94 % of the registered capital

3) Registered capital is Baht 100,000

However, in connection with the policy to join the management of
the company, the Company has not been informed from Cedar and Aspen.
If there is some more information, the Company will inform promptly.
Moreover, Cedar and Aspen has confirmed to the Company that the
Cedar and Aspen do not have an intention to delist the Company
from the Securities Exchange of Thailand ("SE") during the
12-month period after the end of the Tender Offer period unless
the Company is unable to maintain its listing status under the
regulations required by the SET or the Board of directors of
the Company deems it appropriate to propose to delist the Company.

After the Company receive the information from the major shareholders,
the meeting has consider the agenda that relevant the purchase and
sale of the company's ordinary shares by major shareholders

2. Acknowledged the resignation of Mr. Bhannapot Damapong,
Mr. Surasak Vajasit and Mr. Aaruk Chonlatanon and unanimously
approved the appointment of the following person to be new
directors of the Company.

- Mr. Pong Sarasin will hold the office of Mr. Bhannapot Damapong

- Mr. S Iswaranwill hold the office of Mr. Surasak Vajasit

- Mr. Wichit Surapongchai will hold the office of Mr.
Aaruk Chonlatanon

Moreover, in the case that Mr. Bhannapot Damapong, who holds
the Chairman of the Nominating Committee and the Chairman of the
Remuneration Committee, has resigned from such positions,
Mr. Pong Sarasin shall replace the said positions of Mr.
Bhannapot Damapong.

3. Approved the amendment of authorized signatories of the Company
to be compatible with the appointment of new directors, as follows:

"Mr. Wichit Surapongchai, Mr. S Iswaran, Mr. Boonklee Plangsiri, Mrs.
Siripen Sitasuwan, two of these four directors sign jointly together with
the compan's seal affixed"

4. Acknowledged the making of a tender offer for all securities of
the Company. As the case that the major shareholders have reported
the sale of their shares to Cedar and Aspen in the amount of
1,487,740,120 shares, equal to 49. 595 % of the paid up capital.
Cedar and Aspen are obliged to make a tender offer for all securities
of the Company according to the Notification of the Securities and
Exchange Committee No. GorJor. 23/2545 Re: Rules Condition and
Procedure for the Acquisition of Securities for Business Takeovers.
Moreover, the Company are obliged to prepare an opinion concerning
the tender offer in the form 250-2 and shall submit such opinion
to the Office of the Securities and Exchange Committee ("the Office")
and shall deliver a copy of such opinion to each shareholder within
15 business days from the date that the Company received the offer
from Cedar and Aspen. Furthermore, in preparation of such opinion,
the Company shall appoint independent financial advisor to be the
advisor who represent the shareholders and make an opinion concerning
the offer. The meeting has empowered to the Executives Committee to
consider and proposed the independent financial advisor to represent
the shareholders and make an opinion concerning the offer to the
audit committee for approval.

5. Acknowledged the announcement of Voluntary Tender Offer by informing
to the Advanced Info Service Public Company Limited ("ADVANC") at the
price of Baht 72.31 per share. In this regard, Cedar and Aspen receive
the waiver for not obliged to make a tender offer as prescribed
in Clause 8 of the Notification of the Securities and Exchange
Committee No. GorJor. 53/2545 Re: Rules Condition and Procedure
for the Acquisition of Securities for Business Takeovers
(Chain Principle) from the Securities and Exchange Committee
because of the Voluntary Tender Offer of ADVANC's shares has
compensate the Tender Offer of ADVAN's shares that will occur
in the future if Cedar and Aspen hold 50% of paid up capital
of the Company after the voluntary tender offer has made.

6. Approved that the Company not to sell any shares of ADVANC
which the Company holds 1,263,712,000 shares, equal to 42.82
of paid up capital, according to the public announcement of
Cedar and Aspen that they will make a voluntary tender offer
for ADVANC shares because the Board of Directors viewed that
business of ADVANC is able to gain major profit to the Company
and ADVANC's performance is always impressive.

7. Acknowledged the obtaining of a waiver from making chain
principle tender offer as prescribed in Clause 8 of the
Notification of the Securities and Exchange Committee No.
GorJor. 53/2545 Re: Rules Condition and Procedure for the
Acquisition of Securities for Business Takeovers (Chain Principle)
for all securities of ITV Public Company Limited ("ITV"), Shin
Satellite Public Company Limited ("SATTEL") and CS LoxInfo
Public Company Limited ("CSL"). As the Takeover Panel of Thailand
("Takeover Panel") viewed that Cedar and Aspen do not intend to
acquire the securities of ITV and SATTEL, plus, ITV and SATTEL
are do not constitute a substantial portion of the assets of
SHIN, therefore, the Takeover Panel grants a waiver from making
a tender offer for all securities of ITV and SATTEL to Cedar and
Aspen. Moreover, as the Company and SATTEL holds less than
50% of paid up capital of CSL, Cedar and Aspen are not obliged
to make a tender offer as prescribed in Clause 8 of the
Notification of the Securities and Exchange Committee
No. GorJor. 53/2545 Re: Rules Condition and Procedure
for the Acquisition of Securities for Business Takeovers
(Chain Principle) as well.

Furthermore, to provide enough time for shareholders and investors
to analyze that information prior to the subsequent trading of
shares of the Company, the Company would request the temporary
suspension on trading of the Company's shares since 14.30 to
16.30 of today.

Please be informed accordingly.

Sincerely Yours,
-Signed-
(Mr. Boonklee Plangsiri)
Director
Shin Corporation Public Company Limited

[Tettyan]

So now we have a little bit of an idea about who's behind Kularb Kaew. But their chairman says that the initial shareholders will sell off their shares soon to repay the loans needed to buy their stake in Shin. So the $64 question is - to whom do they plan to sell? Maybe I'm reading too much into this - and that this is just one step in a straightforward plan to bring more Thai investors on board, in order to comply with foreign-ownership restrictions. Or could it open the door for the Shinawatras or other politically-connected groups to buy back into the company in future? I saw some i-banker say that if that's what they planned to do, such a set-up would allow them to do so without so much public scrutiny. Since I'm not an expert on the subject, I'm not really sure what to believe.

http://www.nationmultimedia.com/2006..._19730654.html

Originally Posted by The Nation

CROSS-BORDER TAKEOVER: Two new firms pay Bt73 bn for Shin
Published on January 24, 2006

Companies with cross holdings created just weeks before purchase. Three companies involved in the takeover of Shin Corp Plc – Cedar Holdings Co Ltd, Aspen Holdings Co Ltd and Kularb Kaew Co Ltd – were hastily established in Thailand this month, showing how intense the manoeuvres have been.

“There has been discussion on this deal for some time but the talks heated up in the past six weeks,” said one of the advisers.

Cedar was established on January 17, a week before the deal was announced yesterday. Kularb Kaew was established two weeks ago while Aspen was set up last Monday.

Cedar and Aspen yesterday wrapped up the takeover to buy 49.6 per cent from the Shinawatra and Damapong families for Bt73.3 billion. Kalarb Kaew holds 41 per cent of Cedar.

According to former DBS Bank chairman Pong Sarasin, chairman of Kularb Kaew, even though the deal was sealed, Kularb Kaew could be subject to a shareholding change soon.

“Kularb Kaew was established to make Shin a Thai firm after the transactions, but I’ll soon have to sell the stake,” Pong said.

The change in shareholding structure is cited as a means to repay a Bt24 billion loan extended by Bangkok Bank and Siam Commercial Bank to help finance the share purchase. To repay the loans, Kularb Kaew will sell its shares to local investors – including financial institutions and private funds – to seek funds to repay the loans, Pong said.

Under the deal, Temasek Holdings brought in nearly Bt50 billion for the purchase, which was paid through its wholly-owned arm Aspen, while the Bt24 billion was financed by the loans.

Siam Commercial Bank president Jada Watanasiritham said that her bank’s Bt11 billion loan contained no risk as it was fully guaranteed by leading banks in Singapore.

“We have discussed this with the board and we see huge benefits from lending to the country, the telecom industry and the bank itself,” she said. Under the deal, SCB is also a shareholder in Cypress Holdings, which in turn is a major shareholder in Cedar. “This is meant to be a long-term investment,” Jada added.

Of all the Shin shares that changed hands, 38.6 per cent were bought by Cedar and the remainder by Aspen.

Kularb Kaew was co-established two weeks ago by Pong and Supadet Poonpipat, chief executive of Thanachart Bank, together with Temasek. Pong and Supadet jointly own 51 per cent in Kularb Kaew, while Temasek owns 49 per cent. The company’s total registered capital is about Bt160 million.

A financial analyst expressed doubt the Shinawatra family would set up a local fund to acquire shares in Kularb Kaew. If the family did, it would mean they would still have a controlling interest in Shin.

“Anyway, if the family did that, it would be hard to trace and that means the family’s image will remain good,” the source added.

It has been speculated that one reason for the prime minister’s family’s exit of Shin is to deflect criticism of conflict of interest, but a family representative, Suvarn Valaisathien, said yesterday that the decision of the Shinawatra and Damapong families to dispose of their combined 49.6 per cent share to the Temasek-led group was a purely business one.

He said that the families do not want to further invest in the capital-intensive telecom business.

Business Reporters

The Nation

[Scuba22]

Any investment banker worth half a damn knows full well how t get around shareholding restrictions. I can't comment on the Shin structure specifically since I don't know the details, but I can lay out the basics - it's not very complicated actually.

The key is understanding the difference between shareholding (who legally owns how many shares and therefore % of the company), management & governance (who makes decisions), and financial disbursements (where the money goes). These are not the same things, and do not necessarily need to be consistent with each other.

Shareholding is the only item which is covered by the restrictions (I believe); but in many ways, it's the governance and financial disbursements which are the important parts of the business. Suppose you own 80% of a company and I own 20%. We can still agree that I, the minority, will have a management contract to run the business as I see fit. We can further agree that my management compensation will be tied to the profits of the company. That way, the financial distribution can be totally different than the shareholding.

This is where financial structures like intermediary companies and shareholder loans come into play - essentially they're clever ways of adhering to the letter of the law while violating the spirit of it. And if anyone is excellent at doing that, it's our pal Thaksin.

All that being said, I should state that I personally believe that shareholding limits for foreigners are stupid on many counts - let me know if I need to get into this, though I suspect most people in this board feel the same way.

Cheers,

Scuba22

[The Enforcer!]

Can anyone explain the reasoning behind why no tax is being sought by the Revenue Department?

Are share transactions usually tax free?

The Enforcer!

[Tettyan]

A neat little diagram outlining the structure of the deal is on the Manger's website. Maybe we can start from this and start trying to fill in the blanks.

http://www.manager.co.th/IHT/ViewNew...=9490000010092

[BangkokPundit]

Originally Posted by The Enforcer!

Can anyone explain the reasoning behind why no tax is being sought by the Revenue Department?

Are share transactions usually tax free?

The Enforcer!

Today's Bangkok Post has a translation of a Post Today Editorial which I have quoted below which mostly answers your question.

In the largest corporate takeover in Thai history, Prime Minister Thaksin Shinawatra's children and relatives on Monday sold their shares in Shin Corp to Singapore's Temasek Holdings that will generate a tax-free income of more than 73 billion baht. The deal was executed with great prudence. By making the share sales on the Stock Exchange of Thailand, the Shinawatra children and relatives legally enjoy income tax exemption on earnings. But this is not the first time that such tax-free share transactions have been made on the SET.

Late last year, Telenor of Norway took over United Communication Industry and its mobile phone subsidiary Total Access Communication, the operator of DTAC, which resulted in the founding Benjarong-kul family exiting the Thai telecom industry. The Benjarongkul family did not pay tax for the share sales worth about nine billion baht, also made on the stock exchange.

In the case of Shin Corp, everything was done according to the SET's regulations. No one can accuse the Shinawatra family of tax evasion. But because the shares were sold to a foreign company and at a very high price, a lot of questions were raised among the public and the media. If tax were collected, several billion baht could go to the state coffers for use in national development projects.

Is it high time that certain legal loopholes were plugged to prevent businessmen and politicians from reaping huge sums of money through stock manipulation or speculation? Right now, capital gains tax is waived if a share transaction is conducted through the Stock Exchange of Thailand. The tax exemption was introduced more than 30 years ago to encourage private companies to list on the SET and attract more investors.

With the SET now fully developed, we should consider whether the capital gains tax should be imposed.

We can learn from our mistakes and it is never too late to change things. Just consider how much tax the SET can generate for national development

[Scuba22]

From the IHT article linked by Tettyan:

The pricing decision, said deal advisor ML Chayotid Kridakon, was based on the value of the asset.

“A takeover of this magnitude is very rare and there are few [examples] we could base this on,” he said.

(end quote)

Is this a joke? People are pretty high on themselves around here - this may be a big deal by local standards, but it's peanuts compared to global M&A. Here's a short list just from the telecoms sector in 2005:

NTL-Telewest (UK): US$ 6 billion
MCI-Verizon (US): US$ 8.5 billion
SBC -AT&T (US): US$ 16 billion

If you go back to 1999, there's tons of telecoms mergers above US$ 30 billion: AT&T-TCI, MCI-WorldCom, Vodaphone-Airtouch, Telecom Italia-Olivetti, Bell Atlantic-GTE.

Granted these were during a big telecoms bubble, but still, the idea that a US$1.8 billion deal is interesting as a business transaction is silly. The interesting portions of this deal relate to politics and popular perception; the business aspects are fairly banal.

Cheers,

Scuba22

[Scuba22]

Capital gains taxes are a routine political issue in the US. The "rational" argument is that high capital gains taxes make it more difficult for assets to find their "best" owners but placing an artificial incentive against selling things.

The case for high capital gains taxes are more emotional, IMO; since it's usually rich people who own assets to begin with, they're the ones who tend to make capital gains and thus be liable for any capital gains taxes. Cutting capital gains tax thus lowers taxes for primarily rich people - usually not a popular idea.

When the numbers are this high for a single person/family, it does look bad to people, regardless of the rationality or legality of the actual action.

Cheers,

Scuba22

[jpatokal]

Originally Posted by Scuba22

Granted these were during a big telecoms bubble, but still, the idea that a US$1.8 billion deal is interesting as a business transaction is silly. The interesting portions of this deal relate to politics and popular perception; the business aspects are fairly banal.

This is Thailand, not the US. One of the newspapers (WSJ?) was reporting this as the biggest acquisition in Thailand ever, so yes, it is a pretty big deal. Another way to think about it is that it's equivalent to Temasek paying over 1000 baht for every man, woman and child in Thailand... that's a lotta SMSes!

[Scuba22]

Sure, it's a bit deal for Thailand and Singapore - it's about 2% of the GDP of each country, the US equivalent would be a US$235 billion deal - that's massive, absolutely.

My comment was about someone saying that the valuation of such a deal was very difficult because a deal that size is so rare. That's nonsense. Investment banks make valuations on multibillion dollar deals regularly. Temasek was advised by Goldman Sachs, for whom this is a pretty standard deal. The Shinawatras apparently decided to advise themselves instead of getting a major international investment bank to help.

Locally & politically, it's a big deal; but we shouldn't kid ourselves, it only looks like giant fish because it's in a tiny pond.

Don't forget, just a few years ago, SingTel payed about US$10 billion for Optus. The market didn't react kindly - SingTel's shares plummeted afterwards. Pity that Temasek isn't listed or we could get some market reaction to that as well.

Cheers,

Scuba22

[Tettyan]

Aside from the whole "Ample Rich" affair, I had though that the Shin sale at least followed the letter of the law. We could all say what we want about the Shinawatra family's ethics, but it seemed that the law entitled them to the tax exemption on the share sale.

Now, the President of the Law Society of Thailand is arguing otherwise - that the authorities who granted the tax exemption operated outsie the law. Does this count for something, or is he just pulling our leg? Since I'm no investment banker or securities lawyer, I was hoping that those who read this forum who are more familiar with such technicalities could try to shed a little more light.

http://www.nationmultimedia.com/2006..._19854995.html

Originally Posted by The Nation

ANALYSIS: Temasek-Shin Corp deal offers a free lesson in tax-planning
Published on February 07, 2006

The Temasek Holdings-Shin Corp deal might have cost Prime Minister Thaksin Shinawatra political clout, but it carries several virtues, especially to businessmen who have been given a free lesson on tax planning. Despite several dubious tax issues, the authorities have brushed aside public demand that the five persons benefiting from the sale of shares in Shin Corp Plc be taxed.

Even before the explanation by the Shinawatra family’s legal counsellor Suvarn Valaisathien last Wednesday, Finance Minister Thanong Bidaya said that the deal was wrapped up within a proper legal framework.

A day later, the Revenue Department at a press conference reiterated its stance: none of the sellers should be taxed on the Bt73.3 billion proceeds they reaped from selling a 49.6-per-cent stake in Shin to Temasek.

Renowned for his legal counselling and rated as one of the country’s tax planners, Suvarn also insisted that the deal had been executed in accordance with Thai law.

Paul Ashburn and Andrew Jackomos, senior partners of BDO Richfield Advisory Ltd, an international tax consulting firm, said in a letter to The Nation: “There is no new precedent set here. Every day people sell shares on the stock market tax free, in accordance with the law. Every day taxpayers exercise their legal right to arrange their affairs so they can legally minimise their tax bill. The public should be thankful for the free lesson on tax planning.”

Now tax planners can advise their clients to copy the entire process of these transactions, which date back to 2000.

Then, Thaksin’s wife, Khunying Pojaman, transferred Shin shares to her brother Bhanapot Damapong at par without paying tax. Thaksin’s transfers of shares to his children, Panthongtae and Pinthongta, were not taxed either, nor the transfer of shares to his sister, Yingluck.

No taxmen were present when there were transactions of shares between the British Virgin Islands-registered Ample Rich Investments Co Ltd and their former and present shareholders.

To tax planners, these two episodes were determined on the right grounds. While not yet making any profit from the shares, the beneficiaries should not pay taxes for non-existent benefits.

Still, several lawyers raised eyebrows when learning that they were still untaxed after realising capital gains from the shares.

In the first case, Bhanapot and Yingluck reaped Bt39.25 per share in profits, when selling those they received at Bt10 par value at Bt49.25 apiece on January 23. Panthongtae and Pinthongta netted an even higher amount – Bt48.25 per share – on the 329.2 million shares they bought from Ample Rich on January 20 at only Bt1 a share.

Taxmen said selling shares in the stock market sheltered them from capital gains tax.

Dej-udom Krairit, president of the Law Society of Thailand, was outraged with the conclusion. He noted that it is against the Revenue Code.

The Law Society launched a statement explaining that a company’s shares enjoy two statuses: common shares and listed securities. “The law says if you accumulate common shares, you have to sell them as common shares [out of the market]. If you have listed securities, you have to sell them as listed securities [in the market],” Dej-udom said.

He noted that the deal broke the law when Thaksin and Pojaman transferred their shares to their relatives as common shares, but the shares were sold as listed securities.

A dubious point lies with the multi-level share transactions of Ample Rich between Thaksin, his son and his daughter, which does not involve any taxation.

Whatever the accusations might be, they have now been clarified by the financial authorities. And tax planners can now give similar advice to billionaires who need no longer worry about the enormous taxes that share transactions to their children should incur.

There are none.

Business Desk

The Nation

[GWR]

This won't do anything positive for business confidence: -

Supreme Administrative Court accepts Shin Corp case


The Supreme Administrative Court ruled Thursday to accept a lawsuit seeking to cancel licenses granted to Shin Corp for communication satellites, mobile phone services and television broadcast.

The suit was filed by law lecturer Sastra Toon in March, saying Shin Corp was no longer entitled to hold the licenses because its businesses were under the control of Temasek Holdings of Singapore.

The Central Administrative Court earlier rejected the case on ground that Sastra was not a contractual party.

But the Supreme Administrative Court ruled Thursday that Sastra could file the suit in his capacity as a user of such telecom services.

The Nation

http://www.nationmultimedia.com/brea...ewsid=30015446

[Scuba22]

If anyone thought that doing business with Thaksin was free of political risk, they were fools. Any risk has downside, and this is the downside. All that's changed is perception - the risk was always there.

"Business sentiment" can be pretty stupid, and often is. It's scary that so much is dependent on it.

[jpatokal]

Originally Posted by Scuba22

If anyone thought that doing business with Thaksin was free of political risk, they were fools. Any risk has downside, and this is the downside. All that's changed is perception - the risk was always there.

Yup. This has been downplayed (hell, completely ignored) in Singapore media, but Eris Ellis has it spot on:

http://www.theage.com.au/news/busine...036414899.html

It'll be interesting to watch how this blows over if (when?) the deal is formally cancelled.

[Scuba22]

Temasek was being advised by Goldman Sachs, and given Goldman's reputation, they must have thought they were getting decent advice. Yet it's easy to see that the best minds of the best multinationals aren't usually in Southeast Asia, and the Thai contingent is usually several steps below the Singaporean contingent. It makes sense - you don't climb the corporate ladder through Thailand. If you want to make a splash in Asia, you go to Japan, China or India - and perhaps Taiwan or Korea, but Thailand? Naah.

You see people running around with fancy business cards in Thailand, yet the quality of the peoples' skills is such that they'd have a tough time in a bigger market with greater competition.

So it is with Goldman's Thai staff. First, they barely have any Thai staff - just a "representative office" in Bangkok staffed by "relationship managers" whose main purpose is to stay friendly with all major powers and decision-makers. In ordinary times, this is a fine situation. When the brains in Hong Kong come up with some idea, the local flunky can put then in front of key people; and when key people here need brains, the flunky can call Hong Kong. It works out fine - Goldman took stakes in the Dusit Thani Hotel and the Regent (now the Four Seasons) after the crash and did very well; as did its Bangkok Capital Alliance JV with GE Capital.

But you can't count on "relationship" guys to make any decent analysis - all they know is what they hear from their contacts, and if they're spending all their time with TRT cronies, they're not exactly getting decent information.

Temasek clearly got crap advice from Goldman's Thai team, and now it's going to cost them. But what does Goldman care? They've gotten their cut and now its time for the cigars. If they had any self-respect they'd hang their Thai team up to dry, but don't count on it.

Scuba22

PS = thanks for the article, very interesting!