Kuwait family conglomerate Kharafi Group and other investors are expected to reach a deal by the end of this week to sell about 46 percent of Zain, a source familiar with the matter said. The deal could be worth $13.7 billion.

'There are talks now...(we will reach a deal) probably by the end of this week,' the source told Reuters on Monday, declining to be identified due to confidentiality issues.

National Investments Company, owned by Kharafi Group, said earlier on Monday that one of its portfolio clients has informed it about reviewing a sale of 46 percent of Zain's shares.

National Investments said that Al Khair National was 'reviewing the sale of about 46 percent of Zain's shares at a price of 2 dinars per share.'    

Zain shares, which have rallied 20 percent in the past month as speculation of a bid has intensified, were down 6.4 percent to 1.46 dinars at 0917 GMT in Kuwait. National Investments was up 7.8 percent.

The Zain sale would be a remarkable turnaround for the group, a regional powerhouse known for its aggressive expansion, and would be one of the biggest overseas acquisitions into the Gulf region.

Zain CEO Saad Al-Barrak on Sunday told Reuters shareholders were in talks to sell a stake, but would not confirm a report they had agreed to sell 46 percent to Asian investors at 2 dinars a share.

Officials at National Investments and Kharafi were not available for comment. UBS, which has been advising Zain on its restructuring, declined to comment.

'The KD 2 per share that is reportedly going to be paid by an Asian consortium is a price that will be offered to Zain's strategic investors,' said Rami Sidani, head of investments, Mena at Schroder Investment Management, which has a 0.5 percent stake in Zain.

'Even if a strategic investor is willing to pay such a hefty premium for control (25 times PE 2009 and 12 times EV/EBITDA), we do not believe that this will have an impact on the minority shareholders in the market, unless this same investor is interested to buy up to 100 percent of the company, which we still don't have any insight on.'    

Earlier on Monday, Kuwaiti newspapers reported sovereign wealth fund Abu Dhabi Investment Authority (ADIA) was also involved in the deal. ADIA officials could not be reached for comment.

Meanwhile, India's Reliance Communications said it is not in talks to buy a stake in Zain.

Reliance Communications was not looking to buy Zain's African operations either, spokesman Gaurav Wahi said. 'We deny any such move,' he told Reuters.

Zain, the region's second-largest telco by market value, operates in 24 countries including Nigeria and Saudi Arabia. - Reuters