Kuwait court to rule next week on Zain dispute

Reuters, Wednesday 15 Dec 2010

A Kuwaiti court said it would rule next week on a lawsuit from a Zain shareholder unhappy with Etisalat's $12 billion bid for a 46 per cent stake in the Kuwaiti telecoms company.

A court official said on Wednesday that the ruling would be handed down on Wednesday, 22 of december.

The shareholder -- Al Fawares Holding -- which owns a 4.5 per cent stake in Zain, took legal action to halt the due diligence in the planned sale.

Al Fawares had said Zain's board should not have opened its books to Etisalat without board members seeing the offer.

An initial hearing scheduled for 8 december was delayed after a judge postponed it for a week to look at documents.

Hussein al-Ghareeb, Zain's lawyer, told the court on Wednesday that the due diligence process started on 23 November

"Accordingly I request that the court dismisses the urgent part of this case (stopping the due diligence) since the process has already started," Ghareeb said.

"The due diligence is done in stages, so the urgent part of the case is still valid," Rashed al-Radaan, Al Fawares's lawyer told the court.

Etisalat, the Gulf's second-largest telecom operator by market value, has made a bid of 1.7 Kuwaiti dinars per share for the 46 percent stake in Zain, potentially propelling the UAE firm into high-growth markets in the Middle East.

Legal action could delay the transaction, or potentially scupper it. Etisalat has said any deal could fail if definitive documents are not signed by 15 January 2011.

Zain's shares closed 4.1 per cent higher at a 15-month high on Wednesday.

"The probability of the deal going through is getting higher the nearer we get to the end of the due diligence process," said telecoms analyst Irfan Ellam at Al Mal Capital.

"We can't assume that Etisalat hasn't found anything to be concerned about, but nothing has arisen to stop the process so it's a case of no news is good news."

Al Fawares has also objected to a condition in the terms of the proposed deal that requires Zain to sell its stake in Zain Saudi to satisfy regulatory requirements.

Both Etisalat and Zain have operations in Saudi arabia

In October, Kharafi Group, one of Zain's major shareholders, has said it has gathered enough approvals from shareholders to tender the stake to Etisalat.

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