January 31, 2011 / 6:21 AM / 8 years ago

Alwaleed's Kingdom bids for Zain Saudi telco stake

DUBAI (Reuters) - Saudi billionaire Prince Alwaleed’s investment firm has offered to buy Kuwaiti telecom company Zain’s Saudi Arabian assets, paving the way for UAE firm Etisalat ETEL.AD to complete a takeover of Zain.

Alwaleed’s Kingdom Holding 4280.SE, which announced the offer on Monday, did not specify a price for the 25 percent stake in debt-troubled Zain Saudi. Zain said it would study the offer.

Etisalat, the Gulf’s No. 2 telecoms firm, bid $12 billion for a controlling 46 percent stake in Zain (ZAIN.KW) last September.

Zain has to sell its stake in Zain Saudi 7030.SE, valued at 2.75 billion riyals ($733 million), for regulatory reasons as Etisalat also operates in Saudi Arabia.

Kingdom said the offer for Zain Saudi stake will expire on February 6 and needs approval from Zain’s board of directors.

Zain shares rose 2.5 percent on the Kuwaiti bourse after being briefly halted earlier, while Etisalat’s shares jumped 2.5 percent in Abu Dhabi trade at 0715 GMT.

“I don’t think Kingdom will pay a premium. The bid will be priced near to Zain Saudi’s book value, which is 4.3 riyals per share,” said Hesham Tuffaha, head of research at Bakheet Investment Group in Riyadh.

Zain Saudi is an attractive proposition for Kingdom because of Saudi Arabia’s large, young population, and the firm has been trying to get into the local telecoms sector for some time, Tuffaha added.

Etisalat’s bid for Zain has centers on Kuwaiti family conglomerate Kharafi group, a major Zain shareholder. The deal has been dogged by hurdles including a lawsuit attempting to block the sale as well as an unexpected bid by Turkey’s Cukurova Holding to buy 29.9 percent of Zain for $7.89 billion.

Alwaleed, a nephew of Saudi King Abdullah, owns 95 percent of Kingdom Holding and has minority stakes in some of the world’s top companies including Citigroup Inc (C.N).

In November, Kingdom and Prince Alwaleed subscribed $500 million to General Motors’ (GM.N) initial public offering.


A number of Gulf operators have been seen as potential bidders for the Zain Saudi stake. Low margins and high penetration rates in the region are forcing operators to look at potential acquisitions for growth.

But Kingdom’s offer is the first formal bid.

On Thursday, mobile operator Bahrain Telecommunications’ (Batelco) BTEL.BH chief executive said he was still eyeing a stake and would make an offer at the right price. South African group MTN (MTNJ.J) has also expressed interest in Zain Saudi.

Zain Saudi Chief Executive Saad al-Barrak is also eyeing a management buyout of the stake, people familiar with the matter told Reuters.

Zain Saudi, the Kingdom’s newest mobile operator, has borrowed heavily to fend off cash-rich rivals, Saudi Telecom Co 7010.SE and Mobily 7020.SE.

The company is in talks with lenders after missing some commitments last year on a two-year $2.5 billion Islamic loan.

The ruler of Saudi Arabia has a 5 percent stake in Zain Saudi, while Faden Trading & Contracting and Saudi Plastic Factory hold 6.8 percent each, according to Reuters data.

Editing by Andrew Callus

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