/ 9 September 2009

India, Malaysia consortium to buy Zain stake

A consortium of Indian telecom companies and a Malaysian investor will buy a 46% stake in Kuwaiti telecom Zain, an official with major shareholder Kharafi Group said on Tuesday.

The group will pay two dinars a share in a deal that values the stake in the Arab world’s third largest telecommunications company at about $13,7-billion, making it one of the biggest overseas acquisitions into the Gulf region.

The consortium is made up of India’s Vavasi Group, regional telecom companies Bharat Sanchar Nigam and Mahanagar Telephone Nigam, and Malaysian billionaire Syed Mokhtar al-Bukhary.

Kharafi vice-president Bard al-Kharafi told a news conference that the deal would take four months to complete.

”It’s considered a good opportunity to exit the investment,” he said when asked why the company was selling its stake. ”This deal is considered a profit for both parties.”

Kharafi confirmed this week that it was in talks to sell its position in Zain, estimated at about 20%, along with other shareholders. Combined, the group held a 46% stake.

National Investments, owned by the Kharafi Group, said on Monday that one of its portfolio clients, Al Khair National, had informed it that it was reviewing a sale of the Zain stake.

”The involvement of the small investors in this deal is according to the agreement [between the small investors] and Al Khair, with the same price,” Bard al-Kharafi said on Tuesday, adding that the majority of the other Zain shareholders involved in the deal were small, permanent stakeholders.

”Al Khair group signed to provide 46% and God willing we are able to get this percentage.”

No decision has been reached on how the stake would be divided among the consortium, Vavasi said, adding that the group had been in discussions for seven months on a potential deal.

No Africa Sale
Zain, which operates in 24 countries including Saudi Arabia and Nigeria, has been in the midst of a strategic review and repeatedly denied rumors that a stake sale was imminent.

The Kuwait firm, renowned for its aggressive acquisition policy, had retained UBS as an advisor and was shopping its African assets, marking an abrupt turnaround from its stated goal of becoming a top ten global telecom player.

Market speculation of a sale had propelled its stock up 53% since July 9, to an 11-month closing high on September 6, a day after its chief executive told Reuters it was in early talks to sell a stake in its African operations, minus its Moroccan and Sudanese business.

Talk of a stake sale in Zain itself was also rife, with management saying it was unaware of any such plans. Last month, shareholders voted to scrap individual ownership limits.

Vavasi Telegence’s managing director said on Tuesday that the new shareholders now had no plans to offload the African operations.

”Our plan is to consolidate networks further and roll out larger networks and cover greater markets … It’s not to sell for sure,” Farid Arifuddin said at a news conference.

Arifuddin said there was a good fit between Zain and the Indian companies in the consortium.

”We see a lot of synergy between India … and the other countries where Zain group is in operation in Africa,” he said.

”What we bring to the transaction is our experience especially our prospective partners from India … They have the experience of operating in low cost countries.”

Zain stock has dropped 11,5% since Sunday’s close. – Reuters