Sunday, Oct 02, 2011
(This story was originally published Thursday.)
--Kingdom Holding, Batelco end pursuit of a 25% stake in Zain KSA
--Terms and conditions set out in non binding offer couldn't be met
--Kingdom, Batelco say decision is in the best interests of shareholders
DUBAI (Zawya Dow Jones)--Saudi's Kingdom Holding (4280.SA) and Bahrain's Batelco (BATELCO.BH) scrapped their joint bid for 25% of Zain KSA (7030.SA), estimated to be worth as much as $1.2 billion, after failing to agree terms with the Saudi telco's Kuwaiti parent, a move that underlines the problems associated with cross-border mergers and acquisitions in the Middle East.
"The consortium (Kingdom, Batelco) concluded that the terms and conditions as set out in its non binding offer could not be met to its satisfaction," Kingdom said in an emailed statement Thursday. "This follows a period of due diligence and discussions with Zain Group and other stakeholders."
Kuwait-based Mobile Telecommunications Co., or Zain Group (ZAIN.KW), in a separate statement, confirmed talks with Batleco and Kingdom over the Zain KSA stake had ended, and said it "looks forward to assisting Zain KSA" in the development of its mobile telecommunications business in the kingdom in the future.
The failure to strike an agreement over Zain KSA is the latest in string of "almost deals" within the region's telecoms sector. Back in March, U.A.E.-based Emirates Telecommunications Corp., or Etisalat, the region's biggest telecom provider by market value, ditched a near-$12 billion plan to buy 46% of Kuwaiti rival Zain.
"One barrier is that most of the big telecom operators are government owned and they tend to regard these companies as national champions and this hinders M&A," said Matthew Reed, senior analyst at Informa Telecoms and Media in Dubai.
In April, Zain Group signed a non-binding term sheet with Batelco and Kingdom to sell its 25% Zain KSA holding, a deal seen by some as worth around $1.2 billion.
Analysts had previously said that any stake sale deal would be complicated by issues such as management fees structure, debt guarantees currently provided by Zain Group, shareholder subordinated loans to Zain KSA as well as other contingent liabilities of Zain KSA.
"We didn't know who would assume Zain's shareholder loan--not part of the capital restructuring--and guarantee for the Murabaha facility," one analyst, who declined to be named, said Thursday.
"This new development paves the way for Zain Saudi's capital restructuring, which should be now completed by the end of the year. The completion of the capital restructuring should in turn allow Zain Saudi to re-finance its $2.6billion Murabaha facility--which matures in June 2012--at better terms and conditions and thus improve the company's profitability going forward," he added.
Zain KSA, which began operations in Saudi Arabia in March 2008, signed earlier this year a SAR2.25 billion refinancing facility with a group of lenders to fund its network expansion and future growth, and diversify its financing sources.
Zain KSA shares closed Wednesday at SAR6.25, while Kingdom ended at SAR7.50. Zain Group shares closed Thursday down 3.1% to KWD0.940 in Kuwait.
-By Shereen El Gazzar, Dow Jones Newswires, +9714 446 1684 Shereen.elgazzar@dowjones.com
Copyright (c) 2011 Dow Jones & Co.
(END) Dow Jones Newswires
02-10-11 0357GMT
