By Staff writer
Abu Dhabi-based telco reduces size of purchase after Zain shareholder decides not to sell stake
Etisalat lowered the stake it is seeking in Kuwaiti telecoms carrier Zain to 40 percent, two sources familiar with talks said, after a consortium deal to buy 46 percent met opposition from other Zain shareholders.
UAE operator Etisalat, seeking access to high growth Middle East and African markets including Iraq and Sudan, had wanted to buy 46 percent of Zain for $12bn from a consortium led by Kuwaiti construction and investment company Kharafi Group.
But shareholders outside the consortium and a Zain board member opposed the premium the Kharafi Group would earn from the deal and moved to block it, potentially delaying the acquisition.
"There's talk Kharafi couldn't get the 46 percent of Zain to sell and could only pull together 40 percent," said Essa al-Hassawi, assistant manager at Zumorroda Investment Co in Kuwait.
"This shouldn't scupper the sale, which is only a preliminary agreement and so they can be flexible on the terms. Etisalat could buy extra shares in the market or from other shareholders outside Kharafi's consortium or from the treasury shares."
Etisalat's original offer, when included with treasury shares owned by Zain, would have given the UAE carrier a controlling 51 percent stake.
Another source close to the deal said the new purchase threshold would effectively mean the deal would go forward with Etisalat becoming a major Zain shareholder instead.
In a statement Etisalat Chairman Mohammed Omran said he would not confirm the lower stake target.
"Please note that we do not comment on market rumours and we have not yet issued any official statement on this regard yet," he said.
Legal action had threatened to delay the transaction or potentially scupper it. Etisalat has said any deal could fail if definitive documents are not signed by January 15, 2011.
One shareholder, Al Fawares Holding, which owns a 4.5 percent stake in Zain, took legal action to halt the due diligence in the planned sale and a ruling had been scheduled on December 22.
In addition to the premium proposed for Kharafi Group, others had also opposed the sale of a Zain's stake in subsidiary Zain Saudi.
Much of the wrangling over the deal has played out publicly via acrimonious newspaper advertisements in Kuwait, as well as on TV.