Sunday, March 04, 2007

Poor Minority!

KIPCO Group and their clients/affiliates got a sizable bounty from selling their controlling interest in Wataniya Telecom to Qatar’s Qtel: 48% premium above market price on date of agreement to be exact. But some missed out on the party. That is the minority shareholder: the other 49%.

If you happen to be one of the minority shareholders –i.e. no relation with KIPCO- and got over the initial excitement of the transaction only to see your share plunge in the aftermath you would probably think it is not fair. Apparently KIPCO invited its clients and affiliates to tag along on the deal and share in the prize. Some regulations and shareholders' agreements in other countries make this a law. The minority shareholder has a tag along rights when an offer is made to acquire majority share. Had this been the case Qtel would have been obliged to invite all shareholders to the offer and split the control premium. You and I definitely would have been better of. But just like in politics, markets don't always respect minority rights.

4 comments:

skunk said...

Qtel actually wanted the deal over and done with asap, which is why they didnt just buy kipco's original shares but rather enlisted kipco to locate a total of 51%. previously they only owned 1/3 of wataniya. thats why there was a premium, and thats why qtel didnt invite anyone else to the party.

technically they could have gotten a better deal if they wanted to deal with the hassle of aquiring the shares from the market at market prices.

anyone who heard about this deal knew that wataniya would go up in price cos kipco was buying to load up to the 51% mark. those shares would then be sold by kipco to qtel,...

so why people owning wataniya thought they would get anything out of it is beyond me since wataniya was not, as an entity, selling itself or being merged.
"it" was "being" sold, so the benefit goes to the seller, plain and simple.

techincally they did invite the minoirty shareholders by collecting from kamco ugb gulf insurance etc to reach their quota

i do know that being a kipco shareholder i'm sitting quite happily :P

commiserations on your stock dropping quiet a bit, but qtel's management are an impressive bunch of people so wataniya should do well. they said they expect wataniya to add US$1.9 bill to revenues. but again i would be looking at qtel now instead of wataniya since anything wataniya makes will now go to qtel.

bu ziyad said...

Won't cry over spilled milk and let's hope qtel does a good job. My only concern is future acquisitions and treating all shareholders fairly.

cixousianpanic said...

:s eeek!

Anonymous said...

well said buziyad. i was discussing this very thing with others when the deal was being done.

skunk - what buziyad is saying is that we are behind on the laws in this part of the world. other countries have made it law that minority shareholders have to get an offer to prevent being left behind.

you could say it is a form of socialism but if you look deeper, its also being respectful and fair. those guys bought into the minority with an implicit understanding of who the majority control was with. to have it shift without their involvement...