Emirati telecommunications company Etisalat has dropped its $12 billion bid for a large chunk of Kuwaiti rival Zain, ending an effort to significantly expand its reach across the Middle East.
Zain shares tumbled nearly 3 percent Sunday as the deal collapsed.
Etisalat, known officially as the Emirates Telecommunications Corp., cited several reasons for scrapping the deal in a statement posted to the Abu Dhabi stock exchange Sunday. They included the results of its due diligence process, a lack of unanimity among Zain board members and political unrest in the region. It didn’t elaborate. The statement was dated Saturday.
“This is quite a disappointment for Etisalat. One of the key planks of their strategy is to try to increase their international revenues,” said Matthew Reed, a Dubai-based analyst at Informa Telecoms & Media, a research firm. “If Etisalat had got Zain, that would have represented a big boost to its regional and international portfolio.”
Etisalat first announced its bid to acquire 46 percent of Zain in September.
In November, it signed a preliminary agreement with a major Zain shareholder, the Al-Khair National Stocks and Real Estate Co., to begin the due diligence process of going through Zain’s books. It said at the time its offer was binding but subject to certain conditions.
Al-Khair is owned by the Kharafi Group, a Kuwait-based family conglomerate that been leading the effort on Zain’s side to complete the deal. It holds the largest Zain stake outside the government.
The Kuwait Investment Authority, the country’s sovereign wealth fund, owns 24.6 percent of Zain. Zain is officially known as the Mobile Telecommunications Co.
Etisalat had hoped to wrap up the deal months ago, but the process dragged on as it faced resistance from smaller Zain shareholders.
Zain just last week tentatively accepted a $950 million offer to sell its Saudi operations to Saudi billionaire Prince Alwaleed bin Talal’s Kingdom Holding Co. and Bahraini telecom Batelco Group. That deal was necessary for the Etisalat acquisition to move ahead in order to satisfy regulators in Saudi Arabia, where Etisalat already operates.
Etisalat is working to expand its international operations quickly to make up for declining revenues in its home market in the United Arab Emirates, where it no longer holds a monopoly.
A successful bid for the Zain stake would have given it access to new markets in Iraq, Morocco and Jordan, among others.
The Abu Dhabi-based company already operates in 18 countries across the Middle East, Asia and Africa. It has over 100 million customers.
Zain shares sank 2.9 percent to trade at 1.32 Kuwaiti dinars ($4.77) Sunday morning. Etisalat shares edged up half a percentage point to 11 dirhams ($3).
