Alwaleed's Kingdom bids for Zain Saudi stake

31/01/2011 00:00 AST

Saudi billionaire Prince Alwaleed's investment firm has offered to buy Kuwaiti telecom company Zain's Saudi Arabian assets, paving the way for UAE group Etisalat to complete a takeover of Zain.

Alwaleed's Kingdom Holding, which announced the offer on Monday, did not specify a price for the 25 percent stake in debt-troubled Zain Saudi. Zain said it would study the offer.

Etisalat, the Gulf's No. 2 telecoms firm, bid $12 billion for a controlling 46 percent stake in Zain last September.

Zain has to sell its stake in Zain Saudi, valued at 2.75 billion riyals ($733 million), for regulatory reasons as Etisalat also operates in Saudi Arabia.

Kingdom said the offer for Zain Saudi stake will expire on Feb. 6 and needs approval from Zain's board of directors.

Zain shares rose 2.5 percent on the Kuwaiti bourse after being briefly halted earlier, while Etisalat's shares jumped 2.5 percent in Abu Dhabi trade at 0715 GMT.

'I don't think Kingdom will pay a premium. The bid will be priced near to Zain Saudi's book value, which is 4.3 riyals per share,' said Hesham Tuffaha, head of research at Bakheet Investment Group in Riyadh.

Zain Saudi is an attractive proposition for Kingdom because of Saudi Arabia's large, young population, and the firm has been trying to get into the local telecoms sector for some time, Tuffaha added.

Etisalat's bid for Zain has centres on Kuwaiti family conglomerate Kharafi group, a major Zain shareholder. The deal has been dogged by hurdles including a lawsuit attempting to block the sale as well as an unexpected bid by Turkey's Cukurova Holding to buy 29.9 percent of Zain for $7.89 billion.

Alwaleed, a nephew of Saudi King Abdullah, owns 95 percent of Kingdom Holding and has minority stakes in some of the world's top companies including Citigroup.

A number of Gulf operators have been seen as potential bidders for the Zain Saudi stake. Low margins and high penetration rates in the region are forcing operators to look at potential acquisitions for growth.

But Kingdom's offer is the first formal bid. On Thursday, mobile operator Bahrain Telecommunications' (Batelco) chief executive said he was still eyeing a stake and would make an offer at the right price.

South African group MTN has also expressed interest in Zain Saudi.

Reuters