Zain Said to Approve Kingdom Holding, Batelco Offer for Saudi Arabian Unit

The board of Mobile Telecommunications Co. approved a joint offer by Kingdom Holding Co. (KINGDOM) and Batelco to buy its 25 percent stake in Zain Saudi Arabia, two people familiar with today’s board decision said.

Zain, as Mobile Telecommunications is known, will send an approval letter tonight to Kingdom Holding and Batelco, one official said, requesting anonymity because the decision has yet to be announced. Approval will pave the way for a bid by Etisalat to acquire a controlling stake in Kuwait’s biggest phone operator for about $12 billion.

Zain Saudi rose the most since May, surging 9.2 percent to 7.15 riyals after the joint non-binding offer was announced earlier today. Zain advanced 4.4 percent to 1,420 fils and Kingdom Holding, controlled by Saudi billionaire Prince Alwaleed bin Talal, gained 6.9 percent to 9.3 riyals.

Zain’s board last month rejected separate offers from Kingdom Holding and Batelco, as Bahrain Telecommunications Co. is known, to buy the stake in its Saudi unit. The decision was seen as thwarting a bid by Emirates Telecommunications Corp., also known as Etisalat, to buy a 46 percent stake in Zain. Etisalat had said Zain needed to sell its stake in the Saudi unit in a “timely fashion” for the deal to proceed.

‘Makes Sense’

The new offer “makes sense because Batelco has the telecom experience and Prince Alwaleed is well connected by investors,” Irfan Ellam, an analyst at Al Mal Capital PJSC in Dubai, said in a phone interview today. “The question is, what price are they bidding.”

Kingdom Holding and Batelco said the joint non-binding offer and expression of interest will be valid until 9 a.m. Riyadh time tomorrow. The companies didn’t give details about the price they offered for the stake.

“We need to hold at least 15 percent and Kingdom Holding 10 percent, according to regulations,” Batelco Chief Executive Officer Peter George Kaliaropoulos said in a phone interview today. “For the overall 25 percent stake, we will contribute 60 percent of the investment and Kingdom Holding 40 percent.”

Batelco is “pretty confident” the offer will succeed and expects to hear an initial response from Zain by tomorrow morning, according to Kaliaropoulos. The company, which aims to run the Saudi operator if the deal succeeds, increased the price “a little bit” from the previous offer, he said.

Missed Deadline

Etisalat last month missed a second deadline in its attempt to acquire a majority stake in Zain, Al-Khair National for Stocks and Real Estate Co. said March 1. Al-Khair is owned by Kuwait’s Kharafi Group, Zain’s second-biggest shareholder which was leading the sale talks with Etisalat.

Abu Dhabi-based Etisalat said March 2 it is still interested in buying a majority stake in Zain. “Information related to the due diligence have been collected and Etisalat is in the process to study and analyze the information,” Etisalat spokesman Ahmed bin Ali said at the time.

“If Zain Saudi is taken out of the equation then Etisalat’s offer can go ahead as the biggest stumbling block is Zain Saudi,” Ellam said.

To contact the reporters on this story: Fiona MacDonald in Kuwait at fmacdonald4@bloomberg.net Tamara Walid in Abu Dhabi at twalid@bloomberg.net

To contact the editors responsible for this story: Shaji Mathew at shajimathew@bloomberg.net Benedikt Kammel at bkammel@bloomberg.net