x Abu Dhabi, UAEMonday 22 January 2018

Failure of bid leaves Zain to go it alone

Shares in Zain fell by 4.41 per cent yesterday following the collapse of a proposed $12 billion bid for the company by its UAE rival Etisalat.

Zain is back on the market, but investors are not exactly thrilled about its prospects for finding another suitor.

The telecommunications company, listed in Kuwait, closed at 1.3 dinars yesterday, down 4.4 per cent, on the first day of trading after the collapse of a proposed US$12 billion bid by Etisalat.

In a statement to the Abu Dhabi Securities Exchange (ADX) on Saturday, Etisalat said the offer of 1.7 Kuwaiti dinars per Zain share was "no longer viable", citing several reasons for ending the talks. These included regional unrest and disagreement among Zain shareholders.

Shrouk Diab, a telecoms analyst at Rasmala in Dubai, said Etisalat's offer for Zain came with a "significant premium", although it was still considered fair because of the strategic fit that Zain represented for the UAE company. "It was a perfect marriage," she said.

The deal ran into several stumbling blocks, including delays in the completion of due diligence and the rejection of several bids to sell Zain's 25 per cent share in its Saudi operations, a pre-condition of the deal.

However, the latter issue appeared to have been resolved after Saudi Arabia's Kingdom Holding and Bahrain's Batelco Group agreed on the terms to buy the stake. The end of Etisalat's takeover bid caused a slight rise in its share price, which gained 0.46 per cent to Dh11.

Irfan Ellam, a telecoms analyst with Al Mal Capital, said Etisalat's offer for Zain was "generous"and a good strategic fit. Mr Ellam said the failure of the Zain deal would limit but not preclude Etisalat's expansion in the region. "Rather than expand in one go, like with Zain, it will be smaller expansion [via] greenfield licences coming up."

Other opportunities in the region would include new mobile phone licences in Libya, Syria, Iraq and Lebanon, said Mr Ellam.

He added that Zain was likely to remain independent "in the short to medium term".