Etisalat extends deadline for $12bn Zain accord

UAE telecoms operator says there were 'unforeseeable delays' to complete the diligence process
Etisalat extends deadline for $12bn Zain accord
TELCO DEAL: Etisalat has said the deal is unlikely to close before the end of the first quarter (Bloomberg Images)
By Bloomberg
Sun 16 Jan 2011 12:06 PM

Emirates Telecommunications Corp extended a deadline to reach an accord on its $12bn offer for control of Kuwait’s Zain, saying there were "unforeseeable delays" to complete the diligence process.

"The parties have not made sufficient progress toward completion of the proposed transaction in order to meet that deadline due to unforeseeable delays in Zain providing access to all relevant information," Etisalat said in an e-mailed statement on Sunday. "The parties do continue to work toward the announcement of a definitive transaction."

The bid by Abu Dhabi-based Emirates Telecom, also known as Etisalat, to buy about 46 percent of Zain, Kuwait’s largest mobile phone operator, expired January 15. Etisalat got commitments from Zain investors holding about 40 percent of the company, three people involved in the talks said January 14, declining to be identified because the talks are confidential. Etisalat didn’t set a new deadline in its statement today.

Etisalat’s effort to purchase Zain is aimed at deepening its presence in the Middle East, where Zain operates in countries from Kuwait and Iraq to Bahrain after selling most of its African assets last year to Indian billionaire Sunil Mittal’s Bharti Airtel Ltd. for $9bn. For Zain, it is the second attempt by majority shareholders to sell control.

Al Khair National for Stocks & Real Estate Co, which is owned by Kuwait’s Kharafi Group and is leading the sale, is Zain’s second-biggest shareholder with a 12.7 percent stake. The Kuwait Investment Authority sovereign-wealth fund owns 24.6 percent, Bloomberg data shows.

Etisalat has said the deal is unlikely to close before the end of the first quarter. It has also said Zain needs to sell its 25 percent stake in Mobile Telecommunications Co of Saudi Arabia in a "timely fashion" for the deal to move forward.

Complicating the talks, Zain shareholder Al Fawares’s Sheikh Khalifa, who has opposed the Etisalat deal, said Jan. 12 that he’s seeking other buyers. The minority holder is in talks with Cukurova Holding AS, one of the biggest shareholders of Turkey’s Turkcell Iletisim Hizmetleri AS, and other companies for a stake sale, he said.

"The talks are non-binding and not final," he said. "Neither the percentage nor the price is final." CNBC Arabiya Television reported earlier that Cukurova had agreed to buy a 29.9 percent stake in Zain for KD1.72 ($6.1) a share. Etisalat has offered 1.70 dinars a share.

Sheikh Khalifa said his talks with Cukurova and other companies stem from the fact that "a number of Zain shareholders seem to want to exit the company." "I’m just looking for other scenarios," he said, adding that Zain has "many interested suitors."

Etisalat announced its offer on September 30 of KD1.70 a share for a controlling stake in Zain, whose official name is Mobile Telecommunications Co. Excluding treasury stock, the holding would amount to 51 percent of share capital and voting rights, according to a preliminary agreement that Etisalat and Al Khair National for Stocks reached in November.

A previous attempt by Zain shareholders to sell a majority stake failed. In September 2009, Kharafi announced that Al Khair signed a preliminary agreement to sell a 46 percent stake in Zain, valued at $13.7bn, to a group led by India’s Vavasi Group and Malaysian billionaire Syed Mokhtar Al Bukhary. At the time, the sellers and buyers pledged to complete the deal in four months.

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