x Abu Dhabi, UAESunday 21 January 2018

Etisalat seeks $12bn debt to finance Zain purchase

Etisalat is looking to borrow US$1 billion a piece from up to 12 banks to buy 46 per cent of Zain, in what is shaping up to be one of the largest financed acquisitions in Middle East history.

Etisalat is seeking to borrow US$1 billion (Dh3.67bn) apiece from 12 banks to buy a controlling stake in Zain, in what is shaping up to be one of the largest financed acquisitions in Middle East history, according to banking sources close to the deal cited by Reuters.

The market appetite for the loan is strong, with about 20 banks looking at the telecoms deal, one of the bankers said.

"I think this is a sign of good liquidity generally for strong names. Etisalat is a very strong company which happens to be in Abu Dhabi, but it would have got the same response if it was in Europe or Asia," the banker was quoted as saying by Reuters.

Etisalat, the UAE's leading telecoms operator, has an "A plus" rating from Fitch, which said in its latest report on the company it would not expect a borrowing of the full amount to affect that rating because of its conservative financial policy. Among the banks pitching on the deal are Citigroup, HSBC, Societe Generale, Standard Chartered, National Bank of Abu Dhabi, National Bank of Kuwait and Royal Bank of Scotland.

Also yesterday, Al Fawares Holding, a Kuwaiti private equity group, said it would sue Zain and its board for allowing Etisalat to see Zain's books without verifying that its purchase offer was serious.

Al Fawares, a Zain shareholder, said in a front-page advertisement in the Kuwaiti newspaper Al-Watan that the board should have discussed the offer in a meeting before opening the books to Etisalat.

The ad said an approach to buy a big Zain stake last year from an Indian-led consortium was "not serious", and ultimately cost shareholders money.

Etisalat wants to buy 51 per cent of Zain shares at 1.7 dinars a share.

Zain's board on Sunday approved a request by Al Khair National for Stocks and Real Estate, a company owned by the Kuwaiti conglomerate Kharafi Group, to begin due diligence for the deal with Etisalat. The request was posted on the Kuwait Stock Exchange.

Al Fawares did not say when it planned to file suit but litigation could delay the stake sale, even though analysts said they doubted the complaint has merit.

Etisalat announced the offer on the Abu Dhabi Securities Exchange (ADX), along with the proposed price and a note that it represents a conditional offer, which should suffice in terms of disclosure.

"This isn't the case of some unknown entity bidding for Zain," said Irfan Ellam, the vice president of research at Al Mal Capital in Dubai. "It is one of the largest telecoms groups globally looking at buying those assets."

Zain shares closed yesterday at 1.48 dinars.