x Abu Dhabi, UAEThursday 18 January 2018

Kharafi lashes out at rival bid for Zain stake

A competing bid by a Turkish conglomerate for the Kuwaiti operator Zain is an attempt to sabotage Etisalat's efforts buy a controlling stake in Zain, claims the chairman of the Kharafi Group.

A competing bid by a Turkish conglomerate for the Kuwaiti operator Zain is an attempt to "sabotage" Etisalat's efforts buy a controlling stake in Zain, claims the chairman of the Kharafi Group.

Kharafi is a major shareholder in Zain, which is being targeted by Etisalat, which wants to acquire a stake that is estimated will cost Dh44 billion (US$11.97bn).

"We will not support this deal,' Nasser al Kharafi, the Kuwaiti billionaire chairman of Kharafi Group, said yesterday. "They are trying to sabotage our deal with Etisalat. So definitely we will not [be] going into this deal."

The rival bid emerged last week after Sheikh Khalifa Ali Al Sabah, a member of Kuwait's ruling family and of Zain's board of directors, announced that Cukurova Holding, a group that controls the Turkish telecommunications operator Turkcell, had last month offered 1.72 Kuwaiti dinars per share for a 29.9 per cent stake in the operator.

Mr al Kharafi dismissed Cukurova's offer, claiming it was "illegal" given that Sheikh Khalifa, as a Zain board member, could not sell off the company, according to Kuwaiti law.

Sheikh Khalifa declined to comment.

Mr al Kharafi also revealed that the deadline to complete the deal with Etisalat had been extended to the end of the month because not all shareholders have signed on. The original deadline passed last Saturday as Etisalat claimed to have not received all the information it required to complete due diligence.

"We are giving them information but you know sometimes people ask for more information. We keep giving it to them and giving them whatever they are asking," Mr al Kharafi said. "We have until the end of the month now. Things are going very smoothly."

Last September Etisalat announced it had offered Zain shareholders 1.7 dinars per share of the operator for a 46 per cent stake but would give the UAE company 51 per cent of its share capital and voting rights.

If the deal goes through, it would make Etisalat the world's ninth-largest telecoms operator by subscribers, with about 135 million users in more than 20 countries in the Middle East, Africa and Asia.

The Kharafi Group is one of the largest contracting companies in the Middle East with an estimated annual turnover of $5bn. It has a direct stake of 12.7 per cent in Zain and a further estimated indirect stake of at least 7 per cent in the operator.

Mr al Kharafi said the two sideswere "nearly there" in coming to an agreement under the terms and conditions of the deal. However, he admitted that he did not have the full support of Zain's shareholders that make up the 46 per cent stake yet.

It has been reported that Kharafi has commitments from about 40 per cent of Zain's shareholders. Mr al Kharafi declined to specify how much supportthere was, citing "confidentiality" agreements. "[We are] very close to 46 per cent. The rest depends on the agreement with Etisalat. If they agree, I will give them the rest," said Mr al Kharafi.

"I would think by the end of this month, they will decide what they are going to do. We hope we have met the conditions and the deal will go on."

Irfan Ellam, a telecoms analyst with Al Mal Capital, said in a worst-case scenario, Etisalat could buy additional stakes of Zain straight from the market, but it appeared likely it would prevail with its original offer. "Time is of the essence here," Mr Ellam said.

"Obviously Etisalat's due diligence is taking some time but there's no reason to believe Cukurova can be any quicker. The Etisalat transaction is further down the road and together with its stronger synergies, it has a higher probability of success than the Cukurova offer."

Mr al Kharafi said it was Etisalat that approached his company for its stake in Zain, dismissing reports suggesting the Kharafi Group was actively looking to offload its investment in the operator.

"We are looking at anything if it's a good price or a good deal. Nothing is permanent," he said. Etisalat declined to comment.