Etisalat sees Zain financing, due diligence on track
UAE telecoms firm Etisalat said it will complete bank financing and due diligence for its planned USD 12 billion acquisition of Kuwait's Zain by the end of February.
February 25, 2011 / 11:19 IST
UAE telecoms firm Etisalat said it will complete bank financing and due diligence for its planned USD 12 billion acquisition of Kuwait's Zain by the end of February.
Etisalat's bid for a 46% controlling stake in Zain suffered a setback this week after Zain's board rejected all bids for its Saudi unit, a key condition of the deal.The Abu Dhabi-based operator expects to complete due diligence on Zain by the end of February, Chief Financial Officer Salem Al Sharhan reiterated on Thursday. Kuwait's bourse will be closed from February 25 to February 28.Etisalat is seeking three-part financing to buy into Zain, raising USD 6 billion through an 18-month bridge loan that will be repaid with a bond issue, plus a three-year USD 3 billion loan and a five-year USD 3 billion loan. The latter will also be repaid through bond sales."We are in discussion with 18 banks ...we expect to agree initial terms with banks by the end of February," Sharhan told reporters. "Pricing has not been concluded."A decision about pricing will happen after the probability of the transaction becomes clearer," he added.Etisalat, the Gulf's largest telecoms firm, set up an USD 8 billion bond programme in November, but it has yet to announce any potential sales.The firm is in talks with the government to allow it to open up to foreign investors, Sharhan said."It (the stock) is under priced," he said.Regional riskEtisalat's protracted Zain purchase, first announced last September, has encountered several hurdles, including dissent from Zain shareholders and Zain's inability to offload a quarter-stake in its affiliate Zain Saudi.Zain shares fell 7.3% on Sunday after it rejected three bids for Zain Saudi, before recouping these losses by the end of the week.The initial drop "implies the probability of the deal going through is lower than it was two weeks ago," said Irfan Ellam, Vice President, and Al Mal Capital telecoms analyst."Zain has yet to find a buyer for Zain Saudi and due diligence would probably take two to three months, delaying the Etisalat deal."Bankers warned political unrest in the Middle East would be more of a worry, but Etisalat's Sharhan played down concerns.When asked if political turmoil would impact financing costs for the Zain deal, he said "No.""It was always going to be a long-haul transaction," said a Dubai-based banker who asked not to be identified. "One would assume that funding will now be more expensive for Etisalat. The low-level banks will be more worried. The issue is that European banks are now asking questions about the region.""There's no doubt nervousness has crept in - international banks are wary," said a banker at an international lender with operations in the region, adding banks will lend selectively, with the politically-stable UAE among the more attractive regional markets.Etisalat shares rose 0.5% on Abu Dhabi's bourse on Thursday. Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
