UAE telecoms group Etisalat set terms for its plan to buy a stake in Kuwait's Zain on November 03, making any deal dependent on the sale of Zain's Saudi assets as it began scrutiny of the company's books.
Etisalat, formally known as Emirates Telecommunications Co and the Gulf's No. 2 telecoms group, said any deal was unlikely to close before the end of the first quarter next year and could fail if definitive transaction documents are not signed by January 15, 2011.
"Matters are still at an early stage, and the information and data currently available to us are partial," Etisalat's Chairman Mohammed Omran said as the company began a due diligence process on Zain's books.
In September, Etisalat offered 1.7 dinars ($6.06) a share for a 46 percent stake, pegging the deal at just under $12 billion. A major Zain shareholder, the Kharafi Group, has gathered a consortium to tender to the offer.
"It is expected that our due diligence and other work required to reach definitive agreements, if successful, would take a number of weeks and, if signed, the transaction is unlikely to close before the end of first quarter of 2011," Etisalat said in a statement.
Earlier, Etisalat and Kharafi signed an exclusive agreement to begin the due diligence process, a Kharafi unit group said. BNP Paribas, an adviser to the Kharafi group, said Etisalat would pay cash for the stake.
Etisalat's offer for 51 percent of Zain's total issued shares excluding treasury shares - which amounts to a 46-percent stake - depends on Zain selling its investment in Zain Saudi "in a timely fashion," an approximately 25-percent position.
Etisalat already operates in Saudi through its affiliate Mobily. Saudi Zain has said it is in talks with unnamed investors on the stake. Qatar Telecommunications and Bahrain Telecommunications have been touted as potential buyers. Etisalat has been keen to expand outside its home market as competition intensifies for the one-time monopoly.
Zain, the Gulf Arab region's third-biggest telecoms firm, sold its African assets this year but still operates in high-growth Middle Eastern markets such as Iraq and Lebanon, among others.