Kuwait's Zain close to 46% stake sale - report

STAKE SALE: Kuwait's Zain said to be in talks to offload 46 percent of the company to a group of Asian investors. (Getty Images)

Kuwaiti telecom firm Zain said on Sunday its shareholders were in talks to sell a stake in the group, but would not confirm a report they had agreed to sell 46 percent to Asian investors in a deal worth about $13.7 billion.

"As a company we are not involved in such discussions directly, it is between shareholders and the buyer," chief executive Saad al Barrak told Reuters. "Yes, yes, it was agreed from the beginning it was at the level of the shareholders."

Barrak declined to give further details.

The Zain sale would be a remarkable turnaround for the group, a regional powerhouse known for its aggressive expansion, and would be one of the biggest overseas acquisitions into the Gulf Arab region.

A report on Al-Arabiya television on Sunday cited sources as saying that shareholders - among them the family-owned conglomerate the Kharafi Group - had agreed to sell their stake in Zain at a price of around 2 dinars ($6.96) a share to an Asian group and that an official announcement was due shortly.

The offer of 2 dinars per share reported by Al-Arabiya represents a 28 percent premium to Sunday's closing price of 1.56 dinars and values the stake at 3.93 billion Kuwaiti dinars ($13.68 billion), according to Reuters calculations.

Zain, the region's second-largest telco by market value, operates in 24 countries including Nigeria and Saudi Arabia.

"This would be substantial takeover premium, but there are very few companies of Zain's size available in the Gulf - most are government-controlled," said a telecoms analyst who asked not to be identified.

"Zain is a unique proposition and so if the reports are true, then it seems the buyers are willing to pay a premium in the hope that its long-term returns will justify the price."

The firm's biggest shareholders are Kuwait's sovereign wealth fund, the Kuwait Investment Authority, which owns 24.608 percent and Kharafi, which holds at least a 10.86 percent stake, according to the Kuwaiti bourse website. Analysts estimate Kharafi owns about 20 percent in Zain through its units.

Kharafi executives could not be reached for comment.

Zain shares rose 5.4 percent on Sunday on the heels of a 20 percent rise in the past month as speculation of a bid has intensified.

Africa represents about 62 percent of Zain's 64.7 million customers but only 15 percent of the group's net profit, as of end-March. Seven out of 16 African operations made a first-quarter net loss, compared with only Saudi Arabia of its six operations in the Middle East.

CEO Barrak said last week that Zain, whose shareholders voted to scrap individual ownership limits on Aug 31 amid a restructuring, was in negotiations to sell a stake in its African business. It was not immediately clear how a shareholder stake sale would impact those negotiations.

Removing the ownership cap means local or foreign investors are free to bid for control of the firm as a whole.

Two banking sources told Reuters in August that India's Reliance Communications had started talks to buy Zain's African operations.

Barrack would not comment on Sunday if the shareholder talks involved Reliance and a Reliance spokesman declined to comment.

Zain said on July 20 it was reviewing a possible sale of its African operations, excluding Morocco and Sudan, after French media and telecom conglomerate Vivendi broke off acquisition talks. (Reuters)

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