Zain and Etisalat had agreed terms in September, with
Etisalat expecting to qualify for a record Zain
200-fils-per-share dividend, netting it $1.4 billion, according
to Reuters calculations.
This windfall will follow Zain’s $9 billion African asset
sale to India’s Bharti Airtel last year.
However, Etisalat missed a January due diligence deadline
and the chances of it completing a transaction before Zain’s
expected May payout were increasingly remote.
Without the dividend, Etisalat would be reluctant to pay 1.7
dinars per share — Zain fell 4.4 percent to 1.3 dinars on
Sunday — and a revised bid would probably fall foul of new
Kuwait market rules announced in March.
These require buyers of more than 30 percent of a listed
company to extend offer terms to all shareholders. It is not
retrospective.
“Any new bid to take control of Zain would have to involve
minority shareholders, whereas the Etisalat deal was essentially
a private placement,” said Kunal Bajaj, HSBC telecoms analyst.
The new rules could spur Kharafi to sell only its own
holdings, estimated to be around 20 percent of Zain, although at
a lower valuation because this would not be a controlling stake.
Transparency problems, which are widespread in the Gulf Arab
region, but particularly acute in Kuwait, means predicting
Zain’s next move is tough, analysts said.
“Zain’s problem is that it has a shareholder not committed
to the business and I don’t see any other buyers paying what
Kharafi was asking,” said a Dubai-based telecoms analyst who
asked not to be identified. “Zain is an interesting collection
of assets, but if I was an Etisalat shareholder I wouldn’t see
the bid failing as a bad outcome – it was an expensive deal.”
Buyers will face higher borrowing costs in the wake of
deadly unrest in the Middle East, including nearby Bahrain,
which remains under martial law, bank sources said.
Etisalat shares rose 0.5 percent.
(Editing by Alexander Smith)