Kuwait court dismisses Zain lawsuit, clears path for Etisalat deal

23 Dec 2010

Kuwait’s commercial court has ruled that due diligence can proceed on Etisalat’s planned purchase of 46% of Kuwait-based telecoms firm Zain Group, denying a minority shareholder’s attempt to halt the transaction. Al-Fawares Holding Company, which owns 4.5% of Zain, sued the company and its second-largest shareholder, Al-Khair National, as well as National Investments Company, the firm charged with selling the stake, in early December to prevent Etisalat from gaining access to Zain’s data. On 5 December Al-Fawares took out an advertisement in Kuwaiti daily Al-Watan indicating that it was going to demand that Zain be put into receivership unless the deal was made more transparent. The advertisement read: ‘Al-Fawares confirms that continued violations … on the assets of the company and the rights of the board of directors … might push Al-Fawares or other shareholders to go to court and ask for the company to be placed into receivership unless things are done right, transparency is practiced and any attempts to sell Zain Saudi or any other asset of the company are halted’. It was anticipated that prolonged legal action could have badly delayed the transaction; Etisalat has said that any deal could fail if definitive documents are not signed by 15 January 2011. Al-Fawares’s legal representative, Sheikh Khalifa Ali Al-Sabah, has confirmed that the shareholder plans further legal action ‘in the next couple of days’ with a view to derailing the transaction once more.

As previously reported in CommsUpdate, at the end of September, Abu Dhabi-based Etisalat offered KWD1.7 (USD6.1) a share for the stake in Zain. On the basis of 4.3 billion Zain shares outstanding, the stake is valued at about USD12 billion based on current exchange rates. The deal will give Etisalat majority control of Zain and extend its reach in the Middle East.

Kuwait, Etisalat UAE, Zain Group