Comments on: Zain-Vivendi Deal: Mission Impossible

By: true nutrition

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By: Bye Bye Africa « Alpha Dinar- talking GCC finance

Bye Bye Africa « Alpha Dinar- talking GCC finance — Mon, 15 Feb 2010 05:34:45 +0000

[...] CNBC Arabia announced today that Zain Group’s board of directors has approved to sell their African operations to Bharti Airtel for USD10.7 billion (KD3,082 million). Bhari has been interested in the African operation for a while and there were previous negotiations last year for purchasing a stake in Zain Group. Vivendi SA, who came in July and offered USD12 billion for the African operations were the first to start off the Zain’s deal dilemma, but talks didn’t last for long (click here). [...]

By: Broadway’s Latest Play: “mo ZAIN Sale” « Alpha Dinar

Broadway’s Latest Play: “mo ZAIN Sale” « Alpha Dinar — Tue, 22 Sep 2009 19:53:40 +0000

[...] the stock price to above KD 1.000. Alpha Dinar posted an article declaring the Vivendi deal as a mission impossible. A week later, Zain presumably rejected Vivendi’s offer. We doubted Zain rejected Vivendi, [...]

By: Zain: To Sell or Not to Sell? « Alpha Dinar

Zain: To Sell or Not to Sell? « Alpha Dinar — Thu, 20 Aug 2009 13:40:28 +0000

[...] the sale of part of the company? Even with Vivend’s deal the stock isn’t worth KD 1.500 (click here for details). I lost track of all the rumored deal, but it seems the latest one is Indian Reliance which is [...]

By: Zain: To Buy or Not to Buy? « Alpha Dinar

Zain: To Buy or Not to Buy? « Alpha Dinar — Thu, 20 Aug 2009 03:03:04 +0000

By: oikonomia

oikonomia — Wed, 15 Jul 2009 11:20:49 +0000

Thank you Sal, I agree with you on sell on the fact but the stock has a great support and keeps beating analyst expectations so I wouldn’t be surprised if it continues to increase even more. As for the equity, Zain’s equity net of minority interest as of Q1 09 is 2,131mn. But what I meant was the target market cap of 4.2 b. I would be glad to answer any inquery u have regarding zain

By: Sal

Sal — Tue, 14 Jul 2009 23:53:27 +0000

Good job Oik, well delivered. Buy the rumor and sell the fact. I never knew Africa’s operations contributed that much to Zain!
However, shouldn’t the share price be 1.050/ share on an equity of 3925? I subtracted MI in my valuation.

By: keynesian09

keynesian09 — Tue, 14 Jul 2009 19:26:24 +0000

Naser:
Its not that I think the deal wouldn’t happen, but if I was Zain I wouldn’t do it (unless it was extremely lucrative).

I think you raise a couple of fundamental points: Vivendi is desperate for growth and they know the African continent more than Zain.

In its confirmation of talks with Zain, Vivendi highlighted two points:
1. Commitment to its BBB rating
2. Delivering dividends of at least 50% of adjusted Net Income

To uphold its promises, Vivendi can’t acquire all of Zain Africa without severe dilution to shareholders or a downgrade to its credit. Thus, a total take-over is out of question.

Assuming a majority takeover (51%), Vivendi would have to raise 1.4B Euros of capital which would cause a 7% dilution. Although a 7% dilution doesn’t seem significant, please note that Vivendi’s shares have already underperformed the CAC 40 Index (France) by more than 20% YTD.

On the other hand, Vivendi can acquire 51% hassle-free through under-leveraged Maroc Telecom (owns 53% of it). The only issue here is that such a deal would require the approval of the Moroccan government. According to a Citigroup analyst, “the strategic logic of a transaction, even with Maroc Telecom, is non-existent because many of Zain’s assets are number two in their respective markets.”

I think a deal is possible, but a $12B full take-over deal is impossible.

By: Oikonomia

Oikonomia — Tue, 14 Jul 2009 13:17:19 +0000

now 3 companies are bidding for the african operations, and i think Vodafone is one of them

By: Naser

Naser — Tue, 14 Jul 2009 02:34:35 +0000

The question that you bring up about the purchase price being not reasonable can perhaps be answered by a statement I found in the Financials Times:

“Vivendi has little choice but to persevere. It is facing pressure on revenue and margins in its mature markets and needs to find higher growth quickly, even if the price includes failed attempts and high banker advisory fees.”

So in summation, they are DESPERATE for growth sources.

As for the point about going against Zain’s startegy, Vivendi is attempting to acquire a majority stake (between 51% and 65%) not the whole stake, so this gives Zain an exposure to the Aftrican market. Plus you have a French company running the show, which in my opinion has a better chance of succeeding than Zain due to the abundance of French culture in West African countries (ex-French colonies).