KUWAIT: The $13.7 billion sale of a controlling stake in Kuwaiti telecom group Zain was seen as less likely to go through after its major shareholder said on Thursday economic uncertainties had delayed the deal.
Zain’s plunging share price, a lack of transparency, and the Gulf region’s uncertain economic climate have fed speculation that the deal, due to be completed this month, will ultimately fail, analysts said.
Kuwaiti family conglomerate Kharafi Group, which has agreed to sell 46 percent of Zain to a consortium of Asian investors, said on Thursday the deal still stood but would take longer to finalize.
Kharafi agreed to sell at 2 dinars per Zain share in September when the stock was trading at 1.38 dinars, saying at the time the deal would take four months to complete.
Shares in Zain, which now has a market capitalization of about $14.8 billion, closed at 0.990 dinar on Thursday.
“The procedures to complete the selling process could take more time than set before, but it is still ongoing,” National Investments Co. owned by the Kharafi Group, said, adding the financial and economic situation in the region was behind the delay.
A deal at 2 dinars per Zain share, valuing Kharafi’s stake in the third largest Arab telecoms company at about $13.7 billion, would be one of the biggest overseas acquisitions of a Gulf region company.
“I don’t think 2 dinars is realistic. It implied a rich valuation in the market compared to where similar telecom companies were trading,” Simon Simonian, a telecom sector analyst at Dubai-based Shuaa Capital, said.
Naser Al-Nafisi, general manager for Al-Joman Economic Consultancy in Kuwait, citing Zain’s share price, said: “The chances for the deal to succeed is now declining even further. The firm’s profit fell in the third quarter and is expected to fall also in the fourth quarter”.
The buying consortium is led by Indian group Vavasi and includes Indian state-run telecoms firms Bharat Sanchar Nigam Ltd. (BSNL) and Mahanagar Telephone Nigam Ltd. (MTNL), and Malaysian billionaire Syed Mokhtar A-Bukhary.
