Nothing is ever quite what it seems in Thailand, as ING Bank learnt the hard way recently. A main board director flew from Amsterdam late last year to have lunch, shake hands and return smiles with executives at Thailand's eighth-largest bank, Siam City Bank (SCIB). A memorandum of understanding (MOU) was signed under which ING would buy a 10% stake in the Thai-listed bank for Bt1.32 billion ($30 million) as part of a recapitalization.
Three months later, ING country manager Jan Cherim is left "agape" by the deal, which rapidly turned into a fiasco when SCIB's Bt11 per share rights issue an integral part of the ING agreement - sank without trace. Given the Thai bank's Bt5 market share price at the time the 5% take-up was hardly surprising.
"The MOU had a number of conditions, including the most important: in the forthcoming domestic rights issue existing shareholders would not only come up with their own allocations, but if smaller shareholders stayed away they would mop up additional amounts," explained Cherim. "Confirmation was reported to us, which was not contradicted by representatives of the government on the board, that the government would be doing their bit as well," he added.