Etisalat will not make another bid for Zain, and it says the deal broke down because of a Kuwaiti law that would have almost doubled the value of the US$12 billion (Dh44.07bn) transaction.
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The UAE telecommunications company scrapped a proposal to buy the Kuwaiti operator in March, citing a shareholder dispute at Zain, regional unrest and an extended due diligence process.
But Jamal Saif al Jarwan, the group chief international investments officer at Etisalat, said Kuwaiti capital markets laws were the main reason behind the deal collapsing.
Under Kuwaiti law, any company that buys more than 30 per cent of a listed firm's shares must bid for the remaining outstanding shares. That would have potentially resulted in the value of the deal rising above US$20bn.
"I would say the main reason was the mandatory tender offer … the offer of ownership that would be more than $20bn," said Mr al Jarwan. "We have put Zain behind us. It's over."
Zain has a market capitalisation of about $18bn, but a potential offer by Etisalat would have left the UAE company liable to pay the higher figure, said Irfan Ellam, a telecoms analyst with Al Mal Capital.
"In terms of affordability, that kind of stretches things," said Mr Ellam.
But the Zain acquisition still made sense for Etisalat, he said.
"Is it worth doing? Yes, at current price level because growth opportunities are otherwise limited," he said. "At end of the day, it's a good set of assets.
"However, if Etisalat were to re-bid, they would have to offer a higher [price], probably 20 to 30 per cent higher than the current share price. With such a premium, things start to become stretched in terms of the amount of debt Etisalat would have to take on board."
Other factors behind the failed transaction were the publicity surrounding the deal, and Zain's divided board, one of whose key members, the Kharafi Group, was anxious to sell, said Mr al Jarwan.
"Zain is a good company," he said. "We worked with the shareholder. The Kharafis, really they were very patient. They faced difficulties and hardship in Kuwait. So it was not an easy battle. They had to work with many challenges at home, especially the minority shareholders."
"It was a highly publicised transaction," he added. "That kept the heat among the shareholders. High publicity definitely harmed the deal."
Mr al Jarwan was speaking at the TMT Finance and Investment Middle East conference in Dubai.
He said that future acquisitions would be "difficult" for Etisalat because after Zain, there were few opportunities in the region. "We are in acquisition mode … but there's nothing much left," he said.
