x Abu Dhabi, UAEWednesday 17 January 2018

Indian telecoms confirm Zain interest

The largest foreign takeover of a Middle Eastern company appears to be back on track.

The largest foreign takeover of a Middle Eastern company appears to be back on track after two major Indian state-owned telecommunications companies confirmed their involvement in the acquisition of Zain. BSNL and MTNL are expected to provide the bulk of the more than US$10 billion (Dh36.73bn) needed to complete the buyout. Both companies were linked to the purchase when it was announced, but subsequently issued statements saying they were yet to confirm their participation.

But Kuldeep Goyal, the chairman of BSNL, India's largest telecoms company, was quoted in India's Business Standard as saying the firm "has started the process of negotiations for acquisition of a controlling stake in Zain", Kuwait's largest public company. The comment came after the Kharafi Group, Zain's second-largest shareholder and leader of the sale process, announced it had received a letter confirming BSNL's participation in the sale, and saying it would start due diligence in the coming week.

BSNL has built up more than $6bn in cash reserves, but will require clearance from its owner, the Indian government, to make a large overseas purchase. MTNL, another state-owned operator, will also participate in the acquisition, according to comments from a manager at the company published in the Indian press. Both companies were initially announced as partners in the buying consortium, but quickly put out a statement saying no decision had been made regarding the deal. While yesterday's comments stressed that participation depended on due diligence and a valuation, they were the strongest statements yet suggesting the companies intended to take part in the deal.

And in a separate development, the chief of the Kuwait Investment Authority (KIA), Zain's largest shareholder, made his first public comments on the deal during an interview with Al Arabiya television. Bader al Saad, the managing director of the sovereign fund, said the proposed price of 2 Kuwaiti dinars (Dh25.62) per share, valuing the 46 per cent stake at $13.7bn, was "good". "We are not married to our investments. Whenever there is a good return on them, they are for sale," he said, according to a Reuters report.

The Kharafi Group, based in Kuwait, is estimated to control at least 20 per cent of Zain's shares, and could easily amass a controlling stake for the sale with the co-operation of the KIA, which owns about 25 per cent. But the KIA has said it was not taking part in the deal. Last month, Kharafi invited Zain's smaller shareholders to participate in the sale, without specifying the buyer or sale price. The company said those holding less than 300,000 Zain shares, worth Dh5.2 million at yesterday's closing price, could join the sale consortium. Kharafi expects the deal to be completed by the end of January.