A shareholder in Zain has launched legal action to stop the Kuwaiti firm opening its books to Etisalat in an attempt to derail the planned US$12 billion merger between the Middle Eastern operator giants. According to a Financial Times report today, Fawares Holding, which owns about 4.5 percent of Zain, is attempting to stop the sale to Etisalat of a 46 percent stake in the firm, which is being led by Zain’s largest shareholder, the Kharafi  family. Other minority shareholders appear equally opposed to the move. Ali Mousa, chairman of Securities Group, told the newspaper that the “major [Zain] shareholders” represented by his company would “definitely not” be selling their shares to Etisalat. The group represents, among others, Sheikh Salem al-Ali al-Sabah, one of Kuwait’s richest men, who is thought to indirectly control up to 15 percent of the Kuwait firm.

The Kharafis directly and indirectly own about 20-25 percent of Zain, and require the support of other shareholders to drive the deal through. Despite claims from the Kharafis to the contrary, Fawares Holding claims the family has not been able to gather enough shareholder support, and sources say the deal is now at risk of collapsing. The main gripe of shareholders such as Fawares is that the deal will require Zain to offload one of its most valuable assets in Saudi Arabia to meet regulatory requirements (as Etisalat already has an existing operation in the country). “The shareholders remaining in Zain after the Kharafis sell to Etisalat will be stuck with a company that doesn’t own Zain Saudi Arabia, which is central to the company’s plans and future,” said Sheikh Khalifa Ali al-Khalifa al-Sabah who represents Fawares on Zain’s board. Khalifa has launched his own legal action to block the sale of the Saudi unit. A spokesman for the Kharafis said that the sale of Zain Saudi Arabia would not harm the company, given its poor performance, insisted that the price was fair, and said the group was confident that the lawsuits “will fail.”