More doubts over Etisalat's Zain purchase
Zain fails to sell Saudi arm, rejecting Batelco's offer, which could scupper deal
Published: 22 February, 2011
READ MORE: M&A | Africa & Middle East | Zain Group
There are new doubts over the planned purchase of Kuwait-based Zain group by Etisalat of the United Arab Emirates. Zain has rejected an offer by Bahrain's Batelco to buy its 25% stake in Zain KSA of Saudi Arabia, yet the sale of this stake is a condition of Etisalat's purchase (it already has its own Saudi presence via its Mobily unit".
The plan is for Etisalat to purchase a 46% controlling stake in Zain for almost $12bn, creating a Middle Eastern powerhouse with the scale to expand into other emerging markets. However, after various hitches, the firm missed its January 15 deadline to finalize the deal, though it insists this is still proceeding.
The main point at issue has been the requirement to offload the Saudi unit, to comply with that country's competition laws. As this is Zain's most valuable asset, some shareholders believe it would be better to sell to a firm without its own Saudi presence, in order to inflate the price (the Turkish Cukurova Group, which has a controlling stake in Turkcell, is preparing a rival bid). And the deal could be fatally delayed if Zain is unable to find a buyer at a price backed by the investors.
Last month, Zain told Bloomberg that it was exploring expansion into new emerging markets as a back-up plan if the Etisalat deal falls through. "As of now, because of the non-clarity of the Etisalat deal, we should just keep our focus on what we have," said COO Barrak al-Sabeeh. Zain is currently in seven countries, but several are saturated, and it sold off most of its sub-Saharan African units to Bharti of India last year.
Batelco confirmed in a statement that its offer to acquire the stake in Zain KSA had expired. "We believe the Batelco Consortium presented a very fair and reasonable offer to Zain Group," said CEO Peter Kaliaropoulos. "Our offer also involved a significant amount of new cash to be injected into Zain KSA as working capital to accelerate its growth in a highly competitive market."
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