[Update-2] SINGTEL says it will not divest shares in Thai business as GULF makes tender offer for INTUCH

Singapore’s telecommunication giant, Singapore Telecom (SINGTEL) told Thai Enquirer on Monday that it will not divest any of its shares in its Thai units after one of Thailand’s leading energy groups made a surprise tender offer to this morning.

I don’t think SINGTEL is going to sell its 2nd highest earning asset to anybody, a highly placed source told Thai Enquirer this morning.

Thailand’s leading power generating company, Gulf Energy Development Plc (GULF) announced that its board of directors had resolved to make a tender offer for the remaining shares of Intouch Plc, a move that could see the possibility of the energy firm diversifying into the telecommunication infrastructure.

GULF in a statement to the Stock Exchange of Thailand (SET) said that its board had made a decision to make a tender offer for the remaining shares of INTUCH that it does not own at 65 baht a piece, an 11.11 per cent premium to its Friday’s closing price of 58.50 baht a share.

GULF also said that if the tender offer for INTUCH is successful, it would also be willing to undertake a tender offer for Advanced Info Services Plc (ADVANC) and Thaicom Plc (THCOM) which are both majority owned by INTUCH.

INTUCH owns 40.45 percent in ADVANC and another block of 23.32 per cent is owned by Singapore Telecom (SINGTEL). INTUCH also owns 41.13 per cent in THCOM, the satellite provider for Thailand and the region.

No Sale from SINGTEL

The tender offer by GULF is unlikely to be acceptable to SINGTEL which has been investing resources into the Thai operations for the past 15 years, gradually developing it into a highly successful revenue-generating business.

“There is no way that I foresee SINGTEL divesting at this price or even prices higher than this. If it [goes all the way] it will be a decision on the board level which is controlled by SINGTEL,” the source told Thai Enquirer.

In a statement to the Singaporean exchange on Monday, SINGTEL said that it viewed “its stakes in INTUCH and ADVANC as strategic investments and we believe in the long term outlook of the businesses.”

“Singtel is reviewing its strategic options to ensure that INTUCH and ADVANC shareholders get the full benefit of the intrinsic value of the businesses,” the statement reads.

Gradual Accumulation

GULF has steadily bought up shares of INTUCH for the past year and currently owns about 16 per cent of the company. With shares of INTUCH continuing to decline over the past few weeks GULF may have managed to accumulate more shares thus prompting the energy giant to make a mandatory tender offer for all the shares of the company.

Under the Securities & Exchange Commission (SEC) if a company/individual buys more than 25 per cent of the shares of a particular company, he/she needs to make a tender offer for the remaining shares of that particular company at the highest price paid for the acquisition.

GULF has been eyeing ways to diversify from its energy business and has made it known in the market that it is looking to buy out telecommunication assets. 

INTUCH, which was earlier called Shin Corp Plc, and was founded by former Prime Minister Thaksin Shinawatra, before he sold it to Singapore’s Temasek in 2006 of which Singtel is an affiliate.

SINGTEL has helped to oversee the growth of the company and the asset has repaid the faith generously by managing to constantly generate revenue for the parent company even during the various global financial crisis of the past two decades.

Analysts Caution

Analysts caution that the move by GULF was possibly a ‘gimmick’ by the energy company.

“The news does not make sense. It looks like the same gimmick as BDMS trying to tender for BH, in my opinion,” said Maria Lapiz, Managing Director and Head of the Institutional Research Department at Maybank Kim Eng Securities in a morning note to clients.

Bangkok Dusit Medical Services (BDMS) had late last year made a tender offer for the shares of Bamrungrad Hospital Plc (BH) at prices that was considered to be well below the fair value, thus putting a question mark on what the intentions of the tender offer meant.

GULF’s board made a decision for the tender offer at 65 baht a share of INTUCH and 122.86 baht a share for ADVANC (in case GULF gets more than 50 per cent of INTUCH).

Shares of INTUCH were trading higher by 7.7 percent or 4.50 baht at 63 baht a piece while that of ADVANC were trading lower by 1 per cent or 1.50 baht at 167 baht a share at around 10:08 hrs this morning.

Lapiz says that Maybank Kim Eng has a fair value of ADVANC at 234 baht a share while that of INTUCH at 66 baht a share.

“None of these tender offer prices makes total sense. INTUCH is not worth 65 baht if ADVANC is worth only 122.86 baht.”

She said that however, high balling INTUCH at 65 increases chance that minorities will accept the tender. But lowballing ADVANC at 122.86 baht ensures limited participation in the tender offer for ADVANC.

“If we follow this argument to logical conclusion GULF wants INTUCH but not really ADVANC.”

Communication aspirations

Regardless of the success of Monday’s tender offer, GULF has put in place infrastructure to match its aspirations in the telecommunications sector.

Multiple sources have told Thai Enquirer that Gulf Energy CEO Sarath Ratanavadi has hired several high-level telecommunication experts to advise and consult on the eventual acquisition of INTUCH and future plans for Gulf’s telecommunications business.

Sarath has also cultivated close ties to the current government including Deputy Prime Minister Prawit Wongsuwan – who oversees cabinet reshuffles.

The new Minister of Digital Economy and Society, Chaiwut Thanakamanusorn, worked at Gulf Energy for a long period of time and was said to still be close to Sarath. The digital ministry oversees the allocation and bidding for telecommunication spectrums and concessions.

Gulf Energy are currently in the process of suing Move Forward MP Bencha Saenchantra for for defamation for pointing out in parliament connections the company has with the current government and how concessions are won by the energy giant.

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