Prince Alwaleed lodges Zain Saudi bid; due diligence in Etisalat, Zain deal extended to end-February

1 Feb 2011

Kingdom Holding Company (KHC), an investment firm run by billionaire Prince Alwaleed Bin Talal, has made an offer for mobile phone operator Zain Saudi Arabia, the company announced in a statement to the Saudi bourse. KHC confirmed that it has delivered a ‘non-binding offer’ and a preliminary expression of interest to Zain’s board of directors, with a view to acquiring the Kuwaiti group’s contentious 25% stake in Zain Saudi Arabia. The offer is valid until 5pm on Sunday 6 February. A statement issued by KHC explained: ‘Subject to the acceptance of such a letter by the Zain board, the non-binding offer is conditional on several factors which will be met before a binding offer is made. Shareholders of Zain, Zain [Saudi Arabia] and KHC will be informed of any further material developments on a timely basis’.

The sale of the Saudi Arabian cellco – in which Zain holds a 25% stake, valued at USD756 million according to current prices – has arisen following UAE-based Emirates Telecommunications Company’s (Etisalat’s) non-binding offer worth around USD12 billion for a 46% stake in Zain Group. Etisalat already owns a controlling stake in Saudi’s second-placed mobile operator Mobily and its broadband unit Bayanat Al-Oula, so any transaction for Zain’s local assets would contravene local anti-monopoly regulations. It had previously been rumoured that South Africa’s MTN Group and Bahrain’s Batelco were interested in acquiring the stake, but neither company has made a formal offer for the available stake. If KHC acquires the stake in Zain Saudi Arabia, it will be the first telecoms property to be added to its investment portfolio. Prince Alwaleed, who owns 95% of the holding company, presently owns stakes in companies such as Citibank, News Corporation and Apple.

Last week, Etisalat confirmed that it had extended the due diligence process for its acquisition of Zain until the end of February. If the acquisition goes ahead as planned, it will make Etisalat the ninth largest telecoms operator in the world in terms of subscribers.

Saudi Arabia, Etisalat UAE, Zain Group, Zain Saudi Arabia