Deals and IPOs

Temasek seeks to sell $3.1 billion stake in Thailand's Shin Corp to SingTel: sources

A Temasek Holdings Pte employee walks past the company's signage in their office in Singapore.
Munshi Ahmed | Bloomberg | Getty Images

Singapore state investor Temasek Holdings is seeking to sell its $3.1 billion stake in Thai telecom company Shin Corp, according to people familiar with the matter, and has approached its SingTel unit as a possible buyer.

Temasek, which owns 41.6 percent of Shin Corp through a subsidiary, held talks with Singapore Telecommunications, as SingTel is formally known, late last year, said the people, who declined to be identified as the information is not public. Those discussions have since stalled amid political tensions in Thailand, they said.

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The Temasek stake in Shin Corp, founded by former Thailand prime minister Thaksin Shinawatra, is worth $3.1 billion by current market value. In 2006 Temasek led a group of investors including Surin Upatkoon, a Chinese-Thai businessman, that bought 96 percent of Shin Corp for $3.8 billion: Temasek didn't disclose how much it paid for its holding.

"The strategic buyer in which Temasek has a vested interest to sell to here is SingTel. So basically it is going to be an intra-group reorganization," one Hong Kong-based M&A banker said.

The move by Temasek, which oversees $170 billion, to sell its ownership in Shin Corp is consistent with other attempts by the state investor to consolidate some portfolio companies. This would be Temasek's first attempt to bring part of its telecoms operations in the region under one roof, analysts said.

(Read more: Thailand cuts 2014 growth forecast to 3-4%)

However, some of its past consolidation efforts have failed to bear fruit.

Last year its financial services portfolio company DBS Group Holdings made a bid for Bank Danamon Indonesia, but it failed to get approval from Indonesian regulator.

At what point will Thailand start to look attractive?

Political stalemate

The slowdown in Shin Corp deal talks makes it the second potential transaction in Thailand to be put on the back burner due to political stalemate.

ING Groep's planned sale of a 31 percent stake in TMB Bank has also hit roadblocks, Reuters previously reported.

The 2006 Shin Corp deal triggered accusations of insider trading and tax evasion as the Shinawatra family and others involved received $1.9 billion tax-free. Thaksin insisted at the time that the sale satisfied all the rules in a country where share sales conducted through the stock market are not taxed.

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Protests in Bangkok followed, ultimately leading to a coup that ousted Thaksin.

Temasek owns 52 percent of SingTel and a successful acquisition by the latter of the Shin Corp stake would help SingTel to boost its exposure to a relatively bigger market and offset sluggish growth in mature economies.

Shin Corp controls the biggest Thai mobile phone operator, and has interests in several telecommunications businesses, including Advanced Info Service, Thailand's largest mobile phone operator, and satellite firm Thaicom. SingTel already owns 23 percent of AIS.

(Read more: Thai riot police retake protest sites in Bangkok)

Along with Thai investors, Temasek and Surin Upatkoon bought the 96 percent Shin Corp holding in 2006 through a vehicle known as Cedar Holdings. While Cedar has since sold most of its ownership, Temasek remains a Shin Corp shareholder through a subsidiary called Aspen.

A spokesman for Temasek Holdings declined to comment on the talks. A Shin Corp official in Bangkok declined to comment, while a SingTel spokeswoman also declined comment.

Shares in SingTel opened flat in Singapore on Tuesday morning.