IHS Global Insight Perspective | |
Significance | With a conditional offer and due diligence in place, the deal should go through relatively smoothly. |
Implications | Zain Saudi Arabia is likely to be sold off to another Middle East and North Africa (MENA) operator; interest has been generated but no bids as yet. |
Outlook | On completion of the deal Etisalat will have by far the largest mobile coverage in the MENA region. If all goes ahead smoothly, completion could take place by the first quarter of 2011. |
Etisalat, the incumbent operator of the United Arab Emirates, has announced that it has submitted a conditional offer of US$5.97 per share for a 51% stake in Zain, Dow Jones reports (see Middle East and North Africa: 4 November 2010: Major Shareholder Signs Preliminary Agreement for Zain Sale to Etisalat). The offer is an update to its original offer made at the end of September this year of 1.7 dinars per share for 46% of the company. If the deal goes through, the remaining investors in Zain will be the Kuwaiti Investment Authority with 25%, 14% will be in free float and 10% will be Treasury shares.
In June this year Zain sold off its sub-Saharan Africa assets to Indian operator Bharti Airtel, making Zain primarily a Middle Eastern operator with two operations in North Africa, Sudan and Morocco through a 31% stake in Wana (see Sub-Saharan Africa: 9 June 2010: Zain Closes Sale of African Operations to Bharti Airtel). In the Middle East Zain has presence in Jordan, Saudi Arabia, Iraq, Bahrain, Kuwait, and a management contract for Lebanese mobile operator MTC Touch.
Yesterday Zain’s major private shareholder the Kharafi Group signed a preliminary agreement to start the due diligence process for a deal to sell its stake in Zain to Etisalat, which will take around six weeks to complete (see Middle East and North Africa: 3 November 2010: Major Shareholder Signs Preliminary Agreement for Zain Sale to Etisalat).
Outlook and Implications
With a conditional offer and due diligence now in place, Etisalat is on track to complete the deal by the first quarter of next year. Etisalat chairman Mohammad Omran commented on the deal: "The deal provides excellent integration into Etisalat's operations, taking into consideration that Zain's geographic footprint complements that of Etisalat to a large extent, and these are the Sudan, Iraq, Kuwait, Jordan, Bahrain, Lebanon and Morocco markets. We believe that this deal represents excellent value for our shareholders."