Etisalat abandons Zain takeover due to ‘regional unrest’; Zain Saudi deal now in doubt

21 Mar 2011

According to Reuters, UAE telecoms firm Etisalat has scrapped its USD12 billion offer to buy a controlling stake in Kuwait-based group Zain. Etisalat has reportedly blamed the collapse of the deal on Zain’s divided board of directors, the extended period of due diligence and widespread regional unrest. A statement issued by the Abu Dhabi-based firm read: ‘Etisalat has to announce unfortunately that negotiations … towards acquiring a controlling stake in Zain have ended. In light of the broad due diligence carried out by Etisalat … and following the political unrest in the region and due to a lack of consensus in the board (shareholders) of Zain, … the conditional offer is not valid any more’.

As reported in CommsUpdate in late September 2010, Etisalat offered KWD1.70 a share for a 46% stake in Zain, taking the total value of the transaction up to around USD12 billion. However, in November 2010 Etisalat raised concerns that the proposed deal could fall through if definitive transaction documents were not signed by 15 January, when it was initially scheduled to complete due diligence. On 2 March, following the expiration of a second due diligence date, Etisalat reiterated that it was still interested in taking control of Zain.

Any deal between Etisalat and Zain was dependent on the sale of Zain’s Saudi Arabian assets, for anti-trust reasons; Etisalat already owns a controlling stake in Saudi’s second-placed mobile operator Mobily and its broadband unit Bayanat Al-Oula. Last week, the Zain group accepted a joint offer for its 25% stake in Zain Saudi Arabia from Saudi investment vehicle Kingdom Holding Company (KHC) and Bahrain Telecommunications Company (Batelco); the deal was worth between USD950 million and USD1.2 billion. A Zain spokesman told Reuters that the Kuwaiti firm’s board of directors would now need to decide whether or not the sale will still go ahead. Batelco CEO Peter Kaliaropoulos commented: ‘We were not buying Zain, we were buying a stake in Zain Saudi Arabia, and we are still interested in that. Now the question is, will Zain still sell it? But we will proceed’.

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