Kingdom Holding Company (KHC), an investment vehicle controlled by Prince Alwaleed bin Talal bin Abdulaziz Al Saud, has made an offer to buy the Saudi assets owned by Zain, the Kuwaiti telecommunications company involved in a US$11 billion (Dh40.4bn) takeover deal with Etisalat of the UAE.
A successful KHC bid for Zain's Saudi unit would remove a major regulatory hurdle for Etisalat's bid to buy a 51 per cent stake in Zain for 1.70 dinars a share.
Etisalat already operates in Saudi Arabia under the Mobily brand, and acquiring the Zain unit would not be allowed by Saudi Arabia's telecoms regulators.
KHC said it had delivered a "non-binding offer" and a preliminary expression of interest to Zain's board to acquire the Kuwaiti operator's 25 per cent stake in its Saudi unit. The offer expires at 5pm on Sunday in Riyadh.
KHC did not disclose the size of its offer.
"Subject to the acceptance of such a letter by the Zain board, the non-binding offer is conditional on several factors which will be met before a binding offer is made," KHC said.
"Shareholders of Zain, Zain [Saudi Arabia] and KHC will be informed of any further material developments on a timely basis."
Zain's 25 per cent stake in its Saudi unit is valued at about 2.6 billion riyals (Dh2.54bn). Eight Saudi companies own another 25 per cent of Zain, while the state pension fund owns 3.5 per cent and the remaining 46 per cent is floated on the Tadawul All-Share Index.
Other operators said to be interested in acquiring Zain's stake in its Saudi unit include South Africa's MTN Group and Bahrain's Batelco.
"If the company was valued sensibly, we'd be interested, but at this point in time, we have not made any bids at all," said Peter Kaliaropoulos, the group chief executive for Batelco. "We value the company differently to what the company is valued today. I would need to go through more information and a due diligence before Batelco is able to prepare a proper bid for the company."
Executives from MTN could not be reached.
Saad al Barrak, the chief executive of Zain Saudi Arabia, denied earlier reports that he was interested in buying the stake along with a group of partners.
"That is absolutely not true," Mr al Barrak said. "There is no interest from me in that regard. If I do this, it has to be disclosed to the capital markets authority, and without this, I'm not supposed to engage in any discussions [with Zain]."
If KHC is successful in acquiring a stake in Zain, it would be the first telecoms property to be added to its investment portfolio. Prince Alwaleed, who owns 95 per cent of KHC, has focused his investments on banks, hotels and media companies and has acquired significant stakes in Citibank, News Corp and Apple.
Etisalat said on Saturday that it had extended the due diligence process to acquire Zain until February. If the acquisition is completed, it would make Etisalat the ninth-largest telecoms operator in the world by subscribers.