Zain Saudi Arabia deal falls through

Kuwait’s market-leading operator Zain has missed an opportunity to sell a 25% stake in its Saudi Arabian operations. The Zain Saudi Arabia assets were under consideration by Bahrain Telecom and Kingdom Holding – a holding company controlled by Saudi billionaire Prince Alwaleed bin Talal – for US$950 million, but the firms have stated that they no longer intend to acquire them.

The proposed sale was part of Zain Group’s efforts to reduce its debt. If the sale had gone through, the terms stipulated that Zain Saudi Arabia would contribute a further US$250 million towards this debt once ownership had been transferred.

However, after conducting due diligence and negotiating with Zain, Kingdom Holding and Bahrain Telecom “concluded that the terms and conditions as set out in [Zain’s] non-binding offer could not be met to its satisfaction.”

The decision echoes that of Etisalat earlier this year – the UAE operator was poised spend US$12 billion on a controlling stake in Zain, only to change its mind following “current political unrest in the region”, as well as revisions to Kuwait’s regulation that made the acquisition “no longer viable.”

Another complication arose as Etisalat was already operating in Saudi Arabia; therefore, if it took control of Zain it would have been required to dispose of Zain’s Saudi operations due to the Kingdom’s regulatory laws. Zain Saudi Arabia is the third largest operator in the country and one of the Kuwaiti firm’s most lucrative assets, so this met with opposition from several shareholders.

Zain’s stock has taken a significant hit in 2011, falling by 38%. The group refinanced roughly US$600 million of debt earlier this year, and this latest development has sent shares tumbling by up to 4.1%.

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