Dubai: The UAE grocery retailer Spinneys has set the IPO price range at Dh1.42 to Dh1.53 a share as subscriptions are set to open today, based on a statement. The price range values the company at Dh5.1 billion to Dh5.5 billion.
The company is floating 25 per cent via the IPO, with 5 per cent reserved for retail investors. Spinneys will raise between Dh1.278 billion to Dh1.377 billion via the float. Based on its 2023 profit tally, the dividend yield will be between 3.25-3.5 per cent, a solid number for a retail focused business.
In all, 900 million shares are being offered through the Spinneys IPO. The stock will list on DFM May 9.
Cornerstone investors
Spinneys has also drawn in cornerstone investors in the form of Emirates International Investment Company, and Templeton Asset Management Ltd. and Franklin Templeton Investments (ME).
The aggregate commitments of the cornerstone investors are approximately around Dh275 million.
EIIC is the strategic investment vehicle of National Holding, an Abu Dhabi-based group with 'long-term strategic investments' in a number of regional and international companies, such as Abu Dhabi Islamic Bank, ADIB – Egypt, Q Holding and Abu Dhabi National Hotels.
This will be the UAE’s second IPO of the year after Parkin, and with more stock market listings to follow from blue-chip names. Retail investor interest in Spinneys has been building up nicely, according to banking industry sources, despite the distractions of last week with the heavy rains and the subsequent flooding.
"We believe this is a truly unique offering - a rare private sector listing for the local market and an opportunity for investors to participate in the story of a much-loved household name," said Sunil Kumair, CEO of Spinneys, which is part of Al Seer group.
"Ours is a business that offers continued growth with a strong track record built on the expansion of our store network, increasing online penetration, our differentiated private label offering, and a vertically integrated supply chain - combining to deliver strong profitability.
"We look forward to announcing the final offer price next week and, in due course, welcoming new shareholders to be a part of our growth story.”
Spinneys, which operates more than 70 stores in the UAE, will soon be adding a second market, Saudi Arabia, within weeks. A joint venture (with Abdulmohsin Alhokair Group) will initially go for store openings in Riyadh and then expand to all the key cities in the Kingdom.
Our future growth is expected to be further supported by our planned entry into the highly attractive Saudi market, as well as the introduction of new formats and the expansion of our ecommerce business
The Spinneys’ offer price range will fuel further bouts of interest from retail investors, who will be looking to the upside potential the stock will have on its listing day. (The size and percentages allocated to retail and institutional investors can be changed at any point during the subscription period. Subscription closes April 30.)
Dividend policy
Spinneys has set a dividend payout at 70 per cent of distributable profits after tax. These will be distributed semi-annually, in April and October. The first of these will be done in October this year.
That the IPO will hit over-subscription levels is a foregone conclusion. Of most interest for retail investors will be whether Spinneys will raise the allocation from 5 per cent.
"Institutional investor interest in Spinneys is already a done deal, especially with the imminent Saudi expansion," said banker. "But for retail investors, an added attraction would be to see whether their tranche is increased."
What will be particularly appetising for investors are the EBITDA margins of 19 per cent and the near 30 per cent market share it has in Dubai within the grocery and fresh produce category. And then, of course, the entry into Saudi Arabia.
Tapping a loan for an IPO
All through the stock market listing boom the UAE has been seeing since early 2022, there's been one constant. Retail investors have been backing what's coming through by way of IPO despite the spike in interest rates and, by extension, on the cost of their loans.
"The initial loan for IPO subscriptions is based on the application size," said a banker. "Which given the levels of over-subscription boils down to essentially processing fees (and that gets waived for high networth investors).
"For those who get share allocations that are sizeable, the loan tenor can be longer (typically 1-5 years revolving), with the shares held as collateral. Loans are typically priced at 'EIBOR plus' depending on the credit quality of the buyer."
The selling shareholder reserves the right to increase the number of stabilisation shares, up to a maximum of 10% of the sale shares.
