Why is Kharafi selling a 46% stake in Zain if business is so good?
Posted on 07 September 2009 with no comments from readers
It is curious to hear from Reuters that Kuwaiti group Kharafi is ‘in the final stages’ of selling a 46 per cent stake in Zain, the region’s second largest telecoms firm by stock market value to Asian investors that will put a $13 billion price tag on Zain, formerly MTC.
CEO Saad Al Barack has confirmed that talks are taking place but has not commented on details and Indian giant Reliance Communications has denied that it might be the buyer. Zain shares are up 20 per cent over the past month as speculation about a possible bid has intensified.
Zain for sale
Zain first announced on July 20th that it was looking at the possible sale of its African operations, including Morocco and Sudan.
When I interviewed Mr Al Barack a few years ago he was then building up his African operations where low mobile penetration rates left huge room for profitable market growth. Perhaps a saturation point has been reached and so Kharafi wants out, or perhaps the group simply needs the cash.
Or maybe this is more a reading of financial markets, and a sense that there is a sweet-spot in markets that may not last for long. Seizing this window of opportunity to realize such a substantial cash pile would then look a very shrewd business move.
Mr Al Barack has certainly been one of the most successful regional CEOs in creating shareholder value, and has applied the mobile phone business model pioneered by the likes of Vodafone to the Gulf States and wider emerging markets.
Keeping control
That Kharafi is now divesting of a part of this interest says something. But then the cup is only half empty as there will still be the other 54 per cent unsold if this rumored deal actually happens.
Zain remains a business to watch and a great stock to buy on market weakness. Mr Al Barack could still go bargain basement shopping as the telecom giants of the globe are forced to downsize and consolidate.
He would likely get plenty of backing from the local Arabian investment community to raise further finance, if he needed it.
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Last Updated: September 09. 2009 12:54PM UAE / September 9. 2009 8:54AM GMT
The prospective new owners of Zain, the mobile operator that is Kuwait’s largest public company, remain in the process of assembling a consortium of investors to fund the takeover, and the 46 per cent stake to be purchased is still being assembled by Kuwait’s Kharafi Group, a lead partner in the deal said today.
After months of speculation, it has been confirmed that India’s Vavasi Group will team up with the Malaysian billionaire Syed al-Bukhary in purchasing a controlling stake in Zain, but will add new investors to the consortium in the coming months, said Vavasi’s chief executive Farid Arifuddin.