* Kharafi, other investors eye 46 percent stake sale
* Deal could be worth $13.7 bln, buyers unclear
* Shares close down almost 6.5 percent on profit taking
* India's Reliance says not interested in Zain
By Eman Goma and John Irish
KUWAIT, Sept 7 (Reuters) - Kuwaiti family business the Kharafi Group and other investors are preparing to sell a stake in Zain Group in a deal valued at $13.7 billion, driving its shares lower as investors booked profits on the news.
The deal for the stake in the telecoms group, if it goes through, would be one of the biggest acquisitions into the Gulf region, and the most valuable Gulf telecom M&A deal ever.
A company controlled by the Kharafi Group, one of the main shareholders in Zain, said on Monday that it was reviewing a sale of 46 percent of Zain's shares at 2 dinars per share.
"There are talks now ... (we will reach a deal) probably by the end of this week," a person familar with the matter in Kuwait told Reuters on Monday, declining to be identified due to confidentiality issues.
It remains unclear who the buyer is, although rival Gulf Arab telecom firms and international operators have all been linked to the deal.
Emirates Telecommunications Corp said last week it was not interested, while a spokesman for India's Reliance Communications denied any interest in Zain on Monday.
Zain, which operates in 24 countries including Saudi Arabia and Nigeria, has seen its shares rally 20 percent in the past month as speculation of a bid has intensified. It closed down 6.4 percent to 1.46 dinars on Monday.
"Investors believe the transaction will be for a particular group and not everybody will be able to sell at the price of 2 dinars, only the Kharafi group and its related partners," said Naser al-Nafisi, general manager for Al Joman Center for Economic Consultancy in Kuwait.
"So for speculators the story is over and they are now profit taking."
The Zain sale is a remarkable reversal of fortunes for the group, a regional powerhouse once known for its aggressive expansion, that now finds itself on the block.
Zain Chief Executive Saad al-Barrak on Sunday told Reuters shareholders were in talks to sell a stake but could not comment on a reports shareholders were in talks with Asian groups.
Officials at National Investments and Kharafi were not available for comment. UBS, which has been advising Zain on its restructuring, declined to comment.
"Even if a strategic investor is willing to pay such a hefty premium for control ... 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," said Rami Sidani, head of Middle East and North Africa investments at Schroder Investment Management, which has a 0.5 percent stake in Zain.
WHY SELL?
The firm's biggest shareholders are Kuwait's sovereign wealth fund, the Kuwait Investment Authority and Kharafi, according to the Kuwaiti bourse website. Analysts estimate Kharafi owns about 20 percent in Zain through its units.
Al Kharafi, whose chairman Nasser Al Kharafi's net worth is estimated at $8.1 billion, according to Forbes' rich list, is one of the largest conglomerates in the Arab world.
Its food division holds exclusive franchise rights to international food chains such as Pizza Hut and KFC in the Middle East, while its interests span engineering, construction, hospitality and maintenance.
Why Kharafi wants to sell is still unclear.
"The Kharafis are asset traders like Alfa group for example in Russia ... they own many businesses and are not committed to any ... if they are getting a good return on invested capital then why not?" said a Dubai-based telecom analyst who declined to be identified.
Africa represents about 62 percent of Zain's 64.7 million customers but only 15 percent of the group's net profit, as of end-March. Seven out of 16 African operations made a first-quarter net loss, compared with only one -- Saudi Arabia-- of its six operations in the Middle East.
Zain said on July 20 it was reviewing a possible sale of its African operations, excluding Morocco and Sudan, after French media and telecom conglomerate Vivendi broke off acquisition talks. It was not immediately clear how a shareholder stake sale would impact those negotiations.
(Writing by John Irish; additional reporting by Jason Benham, Nicolas Parasie, Matt Smith and Tamara Walid in Dubai, Devidutta Tripathy in New Delhi; Editing by Rupert Winchester)