Keeree may lose control of BTSC

November 6, 1999 -- A HOSTILE takeover is looming large on the horizon of the operator of Bangkok's skytrain after Credit Suisse First Boston (HK) Ltd, which won the auction for a 23 per cent stake in Bangkok Transit System Co (BTSC), moved quickly to show that it was clearly in charge by saying that it had invited the MTR Corporation of Hong Kong to advise it on the system's operations.

But Keeree Kanjanapas, the chief executive of Tanayong Plc, which holds a 51 per cent stake in BTSC, looked determined to fend off the takeover by threatening not to transfer the 265 million shares to CS First Boston (HK).

Despite his failure to seek a court injunction to block the auction of the BTSC shares organised by Schroder International Merchant Bankers Ltd, Keeree said the auction was conducted without legitimacy or any legal foundation.

''What I had expected and did not want to happen did happen today -- that is, Schroder's move to auction off the shares without any justification or legal support. For this reason, I think it won't be possible to see a share transfer [to CS First Boston],'' Keeree said.

CS First Boston (HK) released a statement from Hong Kong yesterday immediately after it had won the bid. It said that the MTR Corporation of Hong Kong had agreed to become its adviser ''in enhancing the value of BTSC, by providing the sort of expertise that has made the Hong Kong transit system one of the best in the world''.

A spokesman at CS First Boston said MTR of Hong Kong would not have any equity participation in the Bangkok mass transit system but would only be providing training to local staff and transferring knowledge gained from its 20 years of experience as a railway operator.

A total of 265 million BTSC shares, held by Tanayong, had been pledged as collateral with a group of foreign creditors for a loan of US$80 million. Since Tanayong failed to honour repayment, Schroder International Merchant Bankers Ltd, who represented the creditors, held an auction of the shares yesterday at the Pan Pacific Hotel in Bangkok.

CS First Boston (HK) was the only bidder for the 265 million shares, offering Bt14.20 a share for a total of Bt3.763 billion. Schroder quoted the opening bid price at Bt13.50 a share.

The auction was held hastily but in accordance with Thai legal proceedings. Keeree desperately sought to prevent the auction from taking place by trying to settle part of the debt. He managed to come up with only US$10 million, hoping to repay the remaining US$70 million over the next 10 days.

But Keeree's efforts were in vain as Schroder, which was represented by local law firm Siam Premier, insisted on proceeding with the auction.

CS First Boston (HK) was the only bidder to show up, triggering speculation from the Keeree camp as to who was really behind this hostile takeover attempt. It is generally known that CS First Boston is an investment banking firm which makes deals for a living and is not a strategic long-term investor.

Legally speaking, an official from the Keeree camp said the auction was only part of a tactic to make it possible to transfer shares.

Thai laws require that any shares pledged as collateral with a financial institution cannot be legally transferred to a new owner when a default on the debt happens. The share transfer can only legally take place after a foreclosure procedure followed by an auction process.

However, Keeree, who controls the share registration book of BTSC, vowed yesterday that he might not cooperate in the transfer of the shares to CS First Boston (HK).

He said that he had tried to come up with the money to repay the creditors by December, but Schroder did not spare him any time.

If Keeree does try to block the transfer of shares, a messy legal battle may ensue, similar to the shareholder conflict at Mah Boonkrong Co and the defunct Union Bank of Bangkok.

What is even more crucial is the upcoming auction of a further 248 million shares, held by CS First Boston, which purchased this sizeable holding from Siam Commercial Bank, the former creditor of Tanayong, for about Bt4 billion. CS First Boston will be going through the same auction and legal process to make it possible for a share transfer of the BTSC stocks under its name.

Keeree yesterday made it clear that he won't allow the next auction of the 248 million shares, or about 20 per cent of the share capital, since he would find the money to repay the Bt4 billion loan. ''If the debt is repaid, the auction will automatically be called off,'' he said.

In this regard, the spokesman of CS First Boston in Hong Kong said: ''If the party in default decides to repay the loans and accrued interests, then we'll take that into consideration.'' But he did not rule out the possibility that CS First Boston might not accept Keeree's deal and proceed with the auction.

There were rumours in Bangkok yesterday that the Cheung Kong Group of Hong Kong business magnate Li Ka-ching is interested in the deal and that Italian-Thai Development Plc, which is the contractor of the mass transit system, is another party waiting in the wings.

But the CS First Boston spokesman denied that his company had anything to do with Cheung Kong nor Italian-Thai Development Plc.