A Kuwaiti investment company has warned that Etisalat’s procedure for acquiring majority control of Zain may violate Kuwait’s share-transfer laws.
In an advertisement in Al-Qabas newspaper yesterday taken out by The Securities Group, an investment company in Kuwait that manages about US$ 2billion (Dh7.34bn) of assets, the company advised that the gathering of the stake for Etisalat should be carried out by a “neutral” company associated with the Kuwaiti bourse.
The company appears to be objecting to the Kharafi Group’s role in managing the transfer of shares to Etisalat.
Etisalat has offered to buy a 46 per cent stake in Zain for 1.7 Kuwaiti dinars per share, a total of about $10.5bn, in a deal that would make the UAE telecommunications operator one of the largest in the world.
Minority shareholders have yet to approve the deal and the Kharafi Group, one of the largest private investors in Zain, is still working to acquire the shares in the company that Etisalat needs to reach the 46 per cent stake it is seeking.
“There’s not really any issue with the Zain shares as a company per se,” said Salem al Ali, the executive vice president for finance at the Securities Group.
“But the deal should be handled by the exchange commission to assure the integrity of the transaction and the shares that [are] converted to cash [are] being custodised by a neutral party.”
Mr al Ali cited a Kuwaiti law requiring that any transaction worth more than 30 per cent of a listed company must be handled by a company associated with the Kuwaiti bourse and that any offer should be placed on the open market for further analysis by shareholders.
“If you don’t follow this law you are in breach,” Mr al Ali said.
“That creates a problem in itself that you’re not following the right procedures. If you want to enter the Kuwaiti market through a purchase of a listed company, this is how it should be done.”
Mr al Ali declined to say how much of Zain his company was managing for its clients but said the law applied to the approximately 22 per cent of Zain that was owned by the private sector.
“It should be done in an open market bid. One cannot expect a single party to take a lead and go to every single shareholder,” Mr al Ali said.
“The methodology, the way it is governed by the law, is quite different. All we are asking for is that you might have misunderstood how the law is enacted.”
Representatives from Etisalat, Zain and the Kharafi Group declined to comment. Officials from the Kuwait Stock Exchange could not be reached.
The deal, however, received the endorsement of Bader al Saad, the general manager of the Kuwait Investment Authority, the country’s sovereign wealth fund.
Mr al Saad, whose fund owns about 24.6 per cent of Zain, told Al Arabiya television the sale would benefit the Kuwaiti bourse and the country’s economy.