Zain accepts joint bid from KHC and Batelco for Saudi unit

14 Mar 2011

According to Saudi investment vehicle Kingdom Holding Company (KHC) Kuwait-based Zain Group has accepted a joint offer for its contentious 25% stake in Zain Saudi Arabia. The bid, in association with Bahrain Telecommunications Company (Batelco), is estimated to be worth between USD950 million and USD1.2 billion. A statement issued by KHC confirmed that the investment vehicle has received ‘preliminary acceptance of the non-binding offer and a preliminary expression from the board of directors of Zain Kuwait’. Prince Al-Waleed Bin Talal, the billionaire owner of KHC added: ‘The consortium’s offer is USD950 million in cash, and is subject to the findings of the due diligence, which could take at least six weeks’. It is believed that the offer will also involve the new stakeholders assuming around USD3.8 billion worth of existing Zain Saudi Arabia debt. According to Reuters, who cited a source familiar with the matter, Zain’s board approved the joint bid with a five-to-two majority vote.

Batelco CEO Peter Kaliaropoulos has described his company’s role in the transaction as a ‘technical partner’ to KHC. He commented: ‘We value (KHC’s) leadership and we look forward to supporting them through an effective technical and business partnership’. As reported by CommsUpdate last month, Zain rejected three bids to sell its 25% stake in Zain Saudi Arabia. Two of the failed bids were lodged by KHC and Batelco respectively; the third unsuccessful bidder was Saudi consortium the Al-Riyadh Group. Batelco CEO Kaliaropoulos maintains that a successful joint KHC/Batelco bid will create additional value for his company’s shareholders. Of the 25% stake, it has been reported that Batelco will retain 15%, whereas KHC will assume the remaining 10%.

The sale of the Saudi Arabian cellco 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. Although the Etisalat deal ostensibly collapsed when due diligence was not achieved by the 28 February deadline, it is believed that the transaction now stands a strong chance of being resurrected.

Saudi Arabia, Bahrain Telecommunications Company (Batelco), Zain Group, Zain Saudi Arabia