KUWAIT CITY, May 31, (Agencies): Kuwait Investment Authority (KIA), the country’s sovereign wealth fund, may sell its 24.6 percent stake in telecoms firm Zain, according to a newspaper report on Monday.
But the fund denied it sought help to evaluaute the fair price of Zain shares, and said it would be “transparent” about any possible intention to sell.
“The Kuwait Investment Authority did not commission any party to evaluate the fair price of Zain shares ahead of selling its stake to a strategic investor,” KIA said in an emailed statement.
Daily al-Qabas, citing unidentified sources, said KIA has asked several investment firms to conduct technical studies on Zain group and the fair price of its shares. The fund would then consider options to either sell its stake to a strategic investor or through an auction.
KIA’s stake is currently worth about $4.5 billion, the paper said.
The mobile operator struck a deal in March to sell its operation’s in 15 African countries to India’s Bharti Airtel . Last week, it said it would distribute a large portion of proceeds from the $9 billion asset sale to shareholders.
In October, KIA’s Managing Director Bader al-Saad said the fund might sell its Zain stake if the price is right. He had said that KD 2 ($6.87) per share was a “good price”.
Zain shares, halted on Sunday pending the distribution of its 2009 dividend, last traded at KD 1.34.
Zain telecom, on the verge of closing a $10.7-billion deal to sell its African operations, decided on Thursday to distribute a huge dividend despite a sharp fall in 2009 profits.
Shareholders approved a board recommendation to distribute dividends equivalent to 170 percent of shares’ nominal value, or $2.26 billion, for 2009 even though net profit slumped 39.4 percent to $677 million.
They overcame objections by leading shareholder Kuwait Investment Authority, the emirate’s sovereign wealth fund, which owns 24.6 percent of the company.
A KIA representative at the shareholders meeting said Zain’s cash position did not allow the payment of huge dividends, especially when the company has short and long-term debt of around $10.7 billion, by coincidence the same value as the sale of its African assets.
“The company is facing difficulties in (repaying) debt, both short and long term ... Most of its other assets cannot be made liquid. We need to be cautious,” the representative said.
But Zain chairman Asaad al-Banwan said the company’s financial position is sound and is not likely to have any problems in the future.
“We have enough cash to pay dividends and repay debt. We have cash in banks,” Banwan told the shareholders.
Fund
In other news, Kuwait Investment Authority (KIA), the country’s sovereign wealth fund, said last week it did not plan to reduce its exposure to euro zone investments, denying a Kuwaiti newspaper report.
“KIA denies local newspaper reports that there is a consideration by (KIA) to reduce its investments and presence in European countries ... as a reaction to crises that some European countries are facing,” KIA said in an emailed statement.
Citing sources familiar with the matter, Kuwaiti newspaper Al-Anba had said on Thursday that the sovereign fund was planning to reduce investments in the euro zone on fears another crisis involving Portugal and Spain was lurking.
The paper added that KIA’s economic reports “confirmed the escalation” of the crisis in Greece, which could lead to new debt problems for the two other European states.
KIA holds a stake in Germany’s Daimler and is a majority stakeholder in telecom firm Zain.
KIA invested about $750 million in U.S. asset manager BlackRock (BLK.N) last year, and said in January it was eyeing investments in Asia and Latin America in 2010.
In December, KIA sold its $3 billion stake in Citigroup Inc for a profit of $1.1 billion.
The authority said in the statement that it was a long-term investor and there was no change to its investment strategy including in the euro zone.
Steffen Kern, economist at Deutsche Bank and a sovereign wealth fund expert, said he viewed any substantial currency restructurings by sovereign funds on the basis of recent economic events in Europe as premature.
“Most sovereign wealth funds have a time frame of well beyond 10 years in their portfolio investments. Based on that, the current economic developments do not warrant a significant shift,” he said.
Kern said portfolio diversification, particularly currency diversification, has been a major priority for sovereign funds, and expected it to remain a key focus going forward.
“I expect that they will take a prudent approach,” he said, adding that despite the seriousness of fiscal problems in some euro zone countries he expected the European Union and its member states to manage and see growth prospects back on track in the medium- to long-term.