x Abu Dhabi, UAETuesday 16 January 2018

Kharafi set for Dh1bn in fees from Etisalat deal

EXCLUSIVE: If Etisalat succeeds in its bid to buy a stake in Kuwaiti rival Zain, Kharafi Group's brokerage unit stands to earn more than Dh1bn in commission

Kharafi Group's brokerage unit stands to earn more than Dh1 billion (US$272 million) in commission if Etisalat succeeds in its bid to buy a stake in its Kuwaiti rival Zain.

Kharafi owns 12.4 per cent of Zain and is being targeted by Etisalat as it pursues of a 46 per cent stake in the operator in a deal worth Dh44.1bn or 1.70 dinars a share.

Nasser al Kharafi, the billionaire chairman of Kharafi Group, confirmed that the National Investments Company, a brokerage in Kuwait, would receive 50 fils per share in the deal for its "role in collecting the 46 per cent ownership needed".

There are more than 4.29 billion outstanding shares of Zain, yielding a commission of more than 98.8 million Kuwaiti dinars (Dh1.29bn) for a 46 per cent stake.

Al Khair National for Stocks and Real Estate Company, a wholly-owned subsidiary of the Kharafi Group, owns 68.8 per cent of National Investments Company, according to Bloomberg data.

The deal is being disputed by Sheikh Khalifa Ali Al Sabah, a member of Kuwait's ruling family who sits on Zain's board of directors. He said a sale of the operator to Etisalat would be a "tremendous violation [of] corporate governance principles for Kuwaiti law".

"We honestly don't care too much about it and whether [Kharafi Group] gets 100m dinars or not, but it explains the motives behind what they're doing," Sheikh Khalifa said in an interview. "They want to do a deal at any cost, at any rate, even if it hurts the company and tarnishes its reputation."

Sheikh Khalifa, whose family also owns 4.5 per cent of Zain through Al Fawares Holding Company, a private-equity group, has been against the sale of Zain since Etisalat made its initial offer last September.

"I just think that there is a lot of potential for this company in the long run. I think we're in a lot of growth markets that we still haven't seen the fruits of," Sheikh Khalifa said.

"I intend to stay with the company and use every means that I have for the company to reach the potential I believe it has."

Etisalat declined to comment.

The UAE operator said on Saturday that it had extended its deadline to complete the due diligence process for purchasing Zain to the end of this month.

Al Fawares has a hearing in Kuwait's appellate court this month to try to block the sale of Zain to Etisalat, Sheikh Khalifa said. The company failed in December in a bid for a Kuwaiti commercial court order to stop Etisalat from conducting its due diligence.

Meanwhile, Sheikh Khalifa said that Al Fawares has started another court case to block the sale of Zain's Saudi Arabian unit. That petition would be presented to Kuwait's preliminary court this month, he said.

On Monday, Saudi Arabia's Kingdom Holding Company made a "non-binding offer" to acquire Zain's 25 per cent stake in the Saudi operator. The stake is currently valued at about 2.6bn riyals (Dh2.55bn).

"It is an offer that is not worthy of consideration because we'd lose out a lot in Zain," Sheikh Khalifa said.

Mr al Kharafi declined to comment on the sale of Zain's Saudi unit, saying it was a matter for the board. However, he said that there was no deadline in place to sell the unit.