The Show Must Go On: Zain stays on sale

The Show Must Go On: Zain stays on sale

Kharafi group still seen keen on Zain stake sale; Kharafi chairman's death does not alter group's cash needs; New market rules could spur sale of smaller Zain stake

April 18, 2011 1:30 by Eva Fernandes

Kharafi’s Etisalat deal was bitterly opposed by some major shareholders and last week the group strengthened its grip on Zain, with Nasser’s son Bader al-Kharafi joining Zain’s board and opponent Sheikh Khalifa Ali al-Khalifa al-Sabah removed.

New Kuwait market rules require bidders for more than 29.9 percent of a listed firm to extend the offer to all shareholders, preventing a deal like that agreed with Etisalat. This could spur Kharafi group to sell just its own Zain stakes but at a much lower price since it would not offer management control.

Etisalat may return with a revised bid. Kuwait’s government is unlikely to sell its estimated 30 percent stake, so the UAE firm need only potentially fund a 70 percent stake purchase.

As a former monopoly, Zain’s sale may yet prove problematic and so another option would be for Kharafi group to push through further asset sales.

In 2010, Zain sold African assets to India’s Bharti Airtel for $9 billion and has agreed to sell its stake in affiliate Zain Saudi to joint bidders Kingdom Holding and Bahrain’s Batelco for $950 million.

“Selling assets would be a way for shareholders to raise money without triggering a buyout of the whole company,” said Martin Mabbutt, Nomura telecoms analyst.

Zain operates in five other countries: Jordan, Lebanon, Bahrain, Sudan and Iraq. The latter two are considered Zain’s top assets outside its home licence, accounting for 39 percent of Zain’s value, estimates Marise Ananian, EFG-Hermes, VP telecoms analyst.

“Zain’s operations in Sudan and Iraq provide the company’s highest subscriber and revenue growth – the other assets are in more or less mature markets,” added Ananian. (Editing by Mike Nesbit)

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