Etisalat said on Sunday it had not made sufficient progress
toward finalizing the deal by the deadline due to “unforeseen delays” in Zain
providing access to relevant information.
“The parties do continue to work toward the announcement of
a definitive transaction,” Etisalat said in a statement.
Shares in Etisalat closed down 0.9 percent on the Abu Dhabi
stock exchange, while Zain ended flat, recovering from an earlier intraday
one-month low. Etisalat offered to buy a 46 percent stake of Zain for 1.7
dinars a share last September. The offer was made to one of Zain’s major
shareholders, Kuwaiti family conglomerate Kharafi Group.
Etisalat, which lost its home monopoly in 2007 with the
arrival of rival Du, launched its bid to expand into high-growth Middle East
markets such as Iraq.
The telecoms firm, 60 percent owned by the government, did
not announce a new deadline for due diligence.
In October, Kharafi Group said it had enough approvals from
shareholders to tender to Etisalat’s bid, even though the deal is still
dependent on the sale of Zain’s assets in Saudi Arabia, for anti-trust reasons.
A Kharafi unit, which is working on behalf of its parent
firm to gather Zain shares to tender to the offer, said on Sunday talks between
deal parties continued.
Etisalat in November had set a Jan. 15 deadline to sign
definitive transaction documents and complete due diligence.
“The three months deadline to sign a definitive agreement
was ambitious in the first place, given the size of Zain and that it operates
in multiple jurisdictions,” said Irfan Ellam, telecoms analyst at Al Mal
Capital. “The fact that due diligence has been extended is not too surprising.”
The deal has been dogged by other hurdles.
Al Fawares Holding, a Kuwait-based Zain shareholder unhappy
with the deal process and a condition that Zain sell its stake in Saudi Zain,
launched a court case to halt the due diligence which was dismissed by a Kuwait
court last month.
Both Etisalat and Zain have operations in Saudi Arabia and
regulatory requirements mean one group must quit its stake.
Last week, CNBC Arabiya reported that Turkey’s Cukurova
Holding is in talks to buy 29.9 percent of Zain for $7.89 billion That deal is
being spurred by a Zain board member who is also a brother of Al Fawares’ head.
“Not setting a deadline could be a tactic that both parties
are using so that Zain’s shareholders opposing the deal would not be able to
have last minute surprises for the Kharafis and Etisalat like what happened
last week,” said Naser Al-Nafisi, general manager for Al Joman Center for
Economic Consultancy in Kuwait, referring to the Cukurova news.
