x Abu Dhabi, UAEFriday 28 July 2017

Zain move may aid Etisalat bid

Zain yesterday voted out a key board member who opposed selling the company to rival Etisalat, reigniting the possibility of a $12 billion buyout by the UAE telecoms firm.

Zain shareholders have approved a US$3.1 billion dividend payout and appointed two new board members.
Zain shareholders have approved a US$3.1 billion dividend payout and appointed two new board members.

Zain yesterday voted out a key board member who opposed selling the company to Etisalat, reviving the possibility of a US$12 billion (Dh44.07bn) buyout by the UAE telecommunications company.

As Zain shareholders yesterday approved a US$3.1bn dividend payout, two new board members were appointed, prompting speculation among analysts the Etisalat deal could be back on track.

Sheikh Khalifa Ali Al Sabah, a key shareholder in the company who was opposed to the Etisalat deal, was voted off the Zain board, a spokesman for the company confirmed. Sheikha Aida Salem Al Ali Al Sabah has also left the board, the spokesman said.

The board members were replaced by Bader al Kharafi of the Kharafi Group, and Sheikha al Bahar of the National Bank of Kuwait. The chairman of the Kharafi Group is Nasser al Kharafi, a Kuwaiti billionaire who was a major proponent of the sale of Zain to Etisalat.

Disagreement among members of the previous board was cited by Etisalat as one of the major reasons behind dropping its $12bn bid for control of Zain. Other barriers to the deal included regional unrest and the failure of a sale of Zain's stake in Zain Saudi Arabia.

Irfan Ellam, a telecoms analyst with Al Mal Capital, said the change in the board could mean the Etisalat deal was back on track.

"If Kharafi has got control of the board, and if he's still a willing seller … that could leave the door open for Etisalat to return to the table," said Mr Ellam.

The regional unrest is abating, and the sale of Zain's Saudi Arabia unit is on track - making a sale of Zain to Etisalat more likely, he added. "A catalyst for Etisalat maybe coming back in could be a sale of the Saudi assets."

A divestment of Zain's 25 per cent stake in Zain Saudi Arabia was a precondition of the Etisalat deal, because the UAE company already has operations in Saudi Arabia.

Zain Group is still pursuing a sale of its Saudi operations to Kingdom Holding, an investment company controlled by the Saudi billionaire Prince Alwaleed bin Talal bin Abdulaziz Al Saud, and the Bahraini telecoms firm Batelco.

It emerged yesterday that Zain Saudi Arabia, which is 25 per cent owned by Zain Group, has signed a two-year refinancing agreement worth 2.25bn Saudi riyals (Dh2.2bn). Saudi Arabia's third mobile operator will use the Sharia-compliant refinancing to help reduce costs and finance future growth, it said in a statement issued to the Saudi Arabia stock exchange.

"Zain Saudi Arabia completed a refinancing agreement, which complies with Sharia laws, on April 11," the statement said. Arab National Bank led the consortium of banks behind the refinancing deal. Other banks included Banque Saudi Fransi and Gulf International Bank, based in Bahrain.

Mr Ellam said Zain Saudi's refinancing move was not necessarily related to the proposed sale of a 25 per cent stake. "It's good housekeeping - to try to reduce the cost of financing," he said. But he added the sale of the stake in Zain Saudi was clearly progressing. "The intentions are there to complete it," he said.

Asaad al Banwan, the Zain Group chairman, said at the annual shareholder meeting a 200 fils per share dividend would be distributed within 10 days. Within the range predicted by analysts, it comes after last year's $9bn sale of Zain's African assets to India's Bharti Airtel.

Mr Ellam said the payout could cause Etisalat to lower its potential offer for Zain, given the previous bid of 1.7 Kuwaiti dinars per share. "If Etisalat were to return to the table, their offer would probably be lower, at around 1.5 dinars, because the previous offer assumed Etisalat would receive the dividend payment."

 

bflanagan@thenational.ae