Thai AirAsia in talks to buy Shin Corp's 50% airline stake

THE management of Thai AirAsia is in talks to buy the 50 per cent stake in the airline held by Shin Corp, in what would be the organisation's first asset sale since it was taken over a year ago by Temasek Holdings.

The deal could signal Temasek's willingness to dispose of Shin Corp's marginal businesses to appease Thailand's military-led government and protect its investment in Advance Info Service, Thailand's biggest mobile operator and Shin Corp's main asset.

Temasek has faced a backlash in Thailand since it bought 49 per cent of Shin Corp from the family of then-Thai prime minister Thaksin Shinawatra.

The tax-free sale caused political turmoil, which led to the military coup against Mr Thaksin in September.

Temasek spent US$3.8 billion (S$5.8 billion) for 96 per cent of Shin Corp, but its market value has since fallen to US$2.4 billion.

Temasek's ownership of Thai AirAsia has been less controversial than has been the case for some of its other Shin Corp businesses, such as Shin Satellite, which Thailand's army chief recently alleged was being used by Singapore to spy on Thailand - a charge Singapore has strongly denied.

The value of the deal, which is expected to be concluded this month, has not been disclosed, but Temasek will get 'a fair price' for its stake, a person with knowledge of the talks said.

Thai AirAsia's management, led by chief executive Tassapon Bijleveld, now holds 1 per cent in the low-cost carrier, with Malaysia's AirAsia holding 49 per cent, the maximum allowed under Thailand's foreign ownership laws.

Shin Corp's stake in Thai AirAsia is held by Asia Aviation, a company set up last year to bring the airline into compliance with Thai foreign ownership rules.

Shin Corp holds 49 per cent in the venture, with the rest owned by Thai businessman Sittichai Veerathummnoon. Asia Aviation paid 400 million baht (S$17.4 million) for the 50 per cent stake.

AirAsia is expected to welcome the deal as the Malaysian carrier has had prickly ties with Singapore, which has denied it landing rights in the Republic. AirAsia invested in Thai AirAsia because Thailand has an 'open skies' agreement with Singapore.

The deal would follow Thailand's seizure this week of Shin Corp's television channel, iTV, when it failed to pay US$3 billion in back taxes and fines after a court found it had allegedly received illegal concessions during the Thaksin administration.

FINANCIAL TIMES