Tech M&A in Thailand Today: The Amalgamation of DTAC and TRUE.

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Potential Southeast Asian tech giant formed by the amalgamation of two major Thai telecoms operators.

In November 2021, two major telecommunication operators in Thailand – namely Total Access Communication Public Company Limited (DTAC) and True Corporation Public Company Limited (TRUE) – disclosed to the public their intention to combine their businesses by way of amalgamation (the “Amalgamation”). The Amalgamation shall merge the rights and obligations, as well as the operation, of the two entities into a new entity (NewCo.), with a business strategy to become a technology company capable of heading Thailand’s push to become one of the leading technologies hub of Southeast Asia.

As a result of the Amalgamation, the total quantity of active mobile numbers of NewCo. is expected to be approximately 51.3 million, approximately 8 million higher than that of Advanced Info Service Public Limited Company (AIS), the current largest mobile phone operator in Thailand and the sole key competitor-to-be of NewCo. in Thailand’s mobile phone operator sector. With regard to the merger control regime in Thailand, the Trade Competition Act (the TCA) is the key piece of legislation governing business mergers. However, the telecommunication business is specifically regulated by the Telecommunication Business Act (as amended) (the TBA), which imposes measurements in respect of trade competition between, and merger control of, operators holding telecommunication licences. The Amalgamation must comply with the relevant notifications issued under the TBA.

Hurdles to clear for business amalgamation in Thailand and its effect on the Amalgamation.

Objecting shareholders

As DTAC and TRUE are public limited companies, their Amalgamation shall comply with the procedures under the Public Limited Company Act (as amended) (the PLCA) – e.g., being approved by their respective shareholders’ meetings. According to the public announcement, DTAC and/or TRUE (as the case may be) shall procure joint venture companies of major shareholders of DTAC and TRUE (JVCos 1) to purchase the shares of their respective

objecting shareholders at the relevant closing price on the Stock Exchange of Thailand as at the date immediately preceding the date of the shareholders’ meeting at which the objectors vote against the Amalgamation.

Voluntary tender offer

In addition to the procedures under the PLCA, two other joint venture companies of major shareholders of DTAC and TRUE (JVCos 2) will proceed with the voluntary tender offer for shares in DTAC and TRUE at the relevant pre-determined tender offer price prior to the offer for purchase of the objecting shareholders’ shares under the PLCA. The tender offer price may not be the same price as the purchase price offered to the objecting shareholders.

Capital of NewCo.

The sum of the paid-up capital of DTAC and TRUE shall become that of NewCo. and shares in both entities shall be converted to shares in NewCo. at the relevant conversion ratio as agreed between DTAC and TRUE, including the agreed rounding up and down mechanism. To ensure that the paid-up capital of NewCo. shall be equal to the sum of DTAC’s and TRUE’s, JVCos 2 will be the balancers for this purpose. That said, if the total number of NewCo. shares issued to other shareholders of DTAC and TRUE, once combined with the number of NewCo. shares JVCos 2 are entitled to in accordance with the conversion ratio, is not equal to the total number of NewCo. shares, the difference shall be issued to JVCos 2 or deducted from JVCos 2’s portion with the payment of the value of such difference to NewCo. by JVCos 2 (if additional shares are allotted to JVCos 2), or vice versa (if certain shares are deducted from JVCos 2’s portion).

Merger control approval and licences

Under the TBA and the relevant notifications, both DTAC and TRUE are required to submit the report for the Amalgamation together with supporting documents – including a certificate to verify the qualifications of directors of NewCo., a termination plan for the existing licences of DTAC and TRUE, and a remediation plan for their customers – to the secretariat of the National Broadcasting and Telecommunications Commission (NBTC) no later than 90 days prior to the registration of the Amalgamation with the Ministry of Commerce (MOC). Currently, there is a question whether the NBTC has authority to prohibit the Amalgamation on the ground that the Amalgamation would reduce the competition in Thailand’s mobile phone operator sector or the NBTC could only impose specific conditions and/or measures on DTAC and TRUE for protection of the public interest if the NBTC considers that the Amalgamation would impact competition in the market. In this regard, AIS’s subsidiary being a mobile phone operator submitted a letter to the NBTC to address the downside of the Amalgamation and to urge the NBTC to disapprove the Amalgamation.

Based on the public information, the report for the Amalgamation has already been submitted to the secretariat of the NBTC but the secretariat of the NBTC still awaits reports of independent advisors on the impact of Amalgamation prior to submission of such report and documentation to the NBTC for consideration.

In respect of the licences, subject to the NBTC’s green light on the Amalgamation, the licences to operate the telecommunications businesses of DTAC and TRUE will become void upon the registration of the Amalgamation with the MOC, and the NBTC will issue a new licence to NewCo. based on the documentation and information of NewCo. submitted to the NBTC.

The current state of the Amalgamation.

Based on the disclosure of DTAC and TRUE, the Amalgamation has been approved by the shareholders’ meetings of DTAC and TRUE held on 4 April 2022 with the objection of approximately 10.92 percent and 0.63 percent of total votes of the shareholders attending the meeting and casting votes of DTAC and TRUE respectively and the Amalgamation is expected to be completed by September 2022.

Amidst the merger trend, Thai regulators are studying the impact of previous merger transactions on the relevant markets to determine potential legal loopholes and will probably impose stringent measures against these.

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