(MENAFN - Arab Times) A Kuwaiti court ruled on Wednesday that Kuwait-based Zain telecom can open its books for due diligence to the Emirati firm Etisalat which has offered to buy a majority stake in Zain.
Al-Fawares Holding, a leading private investor in Zain, had filed a lawsuit against opening the books, on the grounds that it had not seen an official purchase offer from Etisalat.
Al-Fawares, believed to own about five percent in Zain, also demanded that the Kuwaiti company should not be allowed to sell off its Saudi unit, a precondition for the Etisalat deal.
"The case was dismissed," said a court clerk, reading from the verdict, although the verdict can still be challenged before Kuwait's appeals and supreme courts.
In September, Etisalat said it had submitted an offer to the Khorafi Group, the largest private investor in Zain, to buy a majority stake for about 12 billion dollars.
Khorafi Group has a direct stake of 12.7 percent in Zain and an estimated indirect stake of at least seven percent.
Etisalat, the Gulf's biggest telecoms provider by market value, said last month it had signed a preliminary accord with Khorafi to buy 51 percent of Zain shares traded on the Kuwait Stock Exchange at 1.7 dinars (6.1) per share.
Conditions it listed include the completion of satisfactory due diligence, obtaining all applicable regulatory approvals and no material adverse change in Zain's business or financial and regulatory affairs.
Due diligence and the other work required to reach definitive agreements would take a number of weeks, while the transaction is unlikely to close before the end of the first quarter of 2011, Etisalat said.
Etisalat has already started the due diligence process about a month ago and Kuwaiti media reported on Wednesday that the United Arab Emirates company was close to completing the process.
In a statement on Nov 3, Etisalat said its purchase proposal would terminate unless the parties have entered into "definitive transaction documents" by January 15.
If concluded, the deal will be the region's largest telecom transaction.
In October, Kharafi Group, one of Zain's major shareholders, said it had gathered enough approvals from shareholders to tender the stake to Etisalat.
Legal action could have delayed the transaction, or potentially scupper it. Etisalat has said any deal could fail if definitive documents are not signed by Jan 15, 2011.
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.
Etisalat on Sunday had stated that it still wants to buy a 46-percent stake in Zain from a consortium headed by a major Zain shareholder. "The 46 percent conditional deal is still on as agreed upon in the initial proposal," an Etisalat spokesman said in a statement.
On Thursday, two sources told Reuters that Etisalat was now seeking to buy a 40-percent stake in the Kuwaiti telco after the consortium deal met opposition from other Zain shareholders.
There has been market speculation that the consortium is struggling to recruit enough shareholders to reach the 46 percent threshold. This has prompted talk that Etisalat may buy directly shares from other shareholders or on the open market to reach the desired 46 percent.
Earlier, Securities Group Co, a brokerage firm that has opposed the structure of deal to sell 46 percent of Kuwaiti telecom group Zain to Etisalat expressed its willingness to join the deal.
In October, the Kuwait bourse vetoed a bid by Securities Group Co for about 5 percent in telecom group Zain, a move that was designed to protest against the Kharafi-led deal.