Saudi Telecom sets offer price for takeover of Viva in Kuwait

STC, which owns 26% of affiliate, is seeking full control

Saudi Telecom Co (STC) will offer 1 dinar (Dh12, $3.30) per share to buy out other shareholders in its Kuwaiti affiliate Viva, the former monopoly said yesterday, amounting to a 9 per cent discount to Viva’s last closing price.

STC, owner 26 per cent of Viva, is seeking full control of its unit, which rapidly won market share after launching services in 2008 and turned profitable four years later.

Viva’s shares plunged after STC announced its offer price in a statement to Riyadh’s bourse, although the bid document says the offer represents a 14 per cent premium to Viva’s three-month volume weighted average price.

STC has received approval from Kuwait’s market regulator for the takeover offer, with the buyout period open from December 27 to January 31, the statement said.

At 1 dinar per share, STC is valuing Viva at a price to earnings (P/E) ratio of 11.4, based on the company’s third-quarter results, the bid document states.

Domestic rivals Zain and Ooredoo Kuwait/strade at P/E ratios of 18.6 and 9.1 respectively, Reuters data shows. Both have extensive foreign operations.

Listing

STC will fund the takeover through its own cash reserves, the bid document states. Viva’s market capitalisation was $1.81 billion as of Sunday’s market close.

Kuwait’s NBK Capital is exclusive adviser to STC. The United States’ Protiviti is advising Viva, said a source familiar with the matter.

Viva’s shares had gained 20 per cent following STC’s initial takeover announcement in November, ending Sunday at a record closing high 1.1 dinars. The stock was down 9.1 per cent at 1 dinar as of 0711 GMT.

STC has yet to reveal whether Viva will quit the Kuwait bourse. The company only listed in December 2014, nearly six years after completing an initial public offering that raised 25 million dinars by selling half its shares. The company never publicly explained the listing delay.

Before the IPO, STC paid $980 million for Viva’s licence in 2007 and now seems determined to take full control.

Foreign exchange losses and tough competition have prompted some Gulf operators to reduce their international footprint.

Kuwait’s dinar is pegged to a basket of currencies in which the dollar is thought to have a heavy weighting, while the Saudi riyal is pegged to the US currency, meaning there is little foreign exchange risk for STC in raising its Viva stake.