Temasek took advantage of a brief improvement in market sentiment to sell nearly half of its equity stake in Thailand’s Intouch Holdings, raising Bt15.6 billion ($506 million) through a secondary block sale of shares after the market close on Wednesday.
It was Thailand’s largest block trade in more than four years.
Showcasing its nimbleness, Singapore’s sovereign wealth fund took advantage of the narrowest of windows, and arguably the best in recent weeks, to execute the deal on the back of a global stock market rally on Wednesday.
Global investors momentarily turned bullish after the US said it would delay the introduction of 10% tariffs on a range of Chinese goods, before sinking again on Thursday as global recession worries took hold.
The share sale was brought to market just a week after Intouch, the holding company of Thailand’s largest mobile carrier AIS, reported stronger-than-expected earnings for the second quarter. The company’s second quarter net profit of Bt2.9 billion was more than 10% higher than the Bt2.6 billion consensus estimate by equity analysts.
That helped clear a path for the country's biggest block sale of shares since Holcim’s $681 million divestment in Siam City Cement in February 2015, amid the carnage being unleashed across global markets.
LONG TIME COMING
Temasek’s decision to trim its stake in Intouch was no big surprise for the market. The fund sold 21% of Intouch to Singapore Telecommunications (SingTel) for $1.2 billion three years ago, signaling its intention to exit from its only major investment in Thailand.
Investment bankers said Temasek has been looking to divest its stake in Intouch for years in the hope of exiting the controversial investment that was borne out of Thailand’s political crisis in 2006.
In January that year, Temasek paid $3.8 billion to buy a controlling stake in Intouch (then known as Shin Corp) from the company’s founding Shinawatra family, members of which included Thailand’s then-prime minister Thaksin Shinawatra.
The Teamsek-Shin Corp deal sparked controversy because it allowed the Shinawatra family to reap nearly $1.9 billion in tax-free profits. That was achieved because the deal was partially structured as separate stake sales by five individuals of the Shinawatra family, thereby avoiding the capital gains taxes that are typically incurred in company-to-company transactions.
The incident partially led to the military coup in September that year. Local media reported that the military government seized most of the family’s earnings from the Shin Corp sale.
There were also public calls to investigate whether the deal violated Thailand’s foreign investment rules, which stipulate that foreign companies can own a maximum of 49% in Thai companies.
At the time, Temasek acquired 96% of Shin Corp through two entities – Aspen and Cedar – in a complex nominee-structured deal in which Temasek's stake was held through layers of ownership.
Those calls have gradually faded, especially after Thaksin’s sister Yingluck become Thailand’s prime minister in 2011, and are perhaps just history now that Temasek is gradually divesting its stake in Intouch.
Wednesday’s deal, which saw Temasek sell 257.1 million Intouch shares, brought its direct equity stake down to 9.99% from 18.11%. That said, Temasek also still owns an indirect stake of over 10% in Intouch through its 52% interest in SingTel.
The shares were disposed at Bt60.75 each, which was close to the bottom end of the Bt60.5 to Bt62 marketed price range and represented a 5.8% discount to Intouch’s Bt64.5 Wednesday close.
Credit Suisse and Morgan Stanely were joint bookrunners of the block trade.
