Dubai: One of the biggest Saudi business groups, Savola will proceed with the distribution of its entire stake in the dairy company Almarai - of 34.52 per cent - to eligible Savola shareholders after a SR6 billion rights issue.
The Savola Board of Directors has approved the move to prepare for the transaction, 'subject to regulatory authorities’ approvals' and subsequent EGM approval.
Further down, Savola will also consider a stock market listing for its Panda grocery retail chain.
The objective of such a distribution of Almarai shares is to 'unlock value for Savola’s shareholders, who will benefit from direct exposure to the growth potential and future dividend capacity of Almarai, one of the region’s leading food companies'.
Almarai has been one of the most successful investments for Savola Group to date. This is how the stake distribution and rights issue will pan out:
- Savola will distribute its entire 34.52% shareholding in Almarai to eligible shareholders, 'aiming to unlock value for Savola shareholders'.
- Distribution will be preceded by the SR6 billion rights issue, 'substantially strengthening' Savola’s financial position and funding for long-term growth opportunities.
After the rights issue, Savola aims to 'strengthen its financial position' and continue investing in its portfolio, while 'paying down debt and enabling the distribution of the Almarai shares to eligible Savola shareholders'.
The size of the planned rights issue - at SR6 billion - has taken even the keenest market watchers by surprise. That some sale of the Almarai stake was always in the works, but a complete wind down on the Savola interest in one of the biggest F&B companies in the Gulf is still a surprise.
Almarai products are a staple across major markets, despite being in one of the most competitive segments of the food space. The company has also managed to expand its product category in recent times, especially with the whole trend towards healthy snacking.
An IPO and listing for Panda?
Savola also owns the grocery retailer Panda, and it has plans for this one too. "Panda has demonstrated healthy recovery in profitability, thanks to a successful 'Customer Experience' program," Savola said in the statement. "Panda’s future growth strategy centers on sustaining this positive momentum by expanding its footprint and bolstering it with digital initiatives.
"Savola will consider a listing of Panda in the future, presenting an additional shareholder value creation opportunity
This transaction is a first of its kind for both Savola and the Saudi capital market, and the rights issue and distribution of our stake in Almarai will give shareholders direct exposure to both our compelling and growing portfolio and long-term potential of Almarai
"This unique transaction comes at an exciting moment in our four-decade history, as we seek to unlock and optimize value for our shareholders," said Sulaiman Al-Muhaidib, Chairman of Savola Group. "The distribution of our stake in Almarai will provide our shareholders with direct exposure to one of the region’s most loved and trusted food brands.
This unique transaction comes at an exciting moment in our four-decade history, as we seek to unlock and optimize value for our shareholders.
"Going forward, we will focus on investing in the growth of our core food and retail businesses, whilst continuing to review strategic options to realize value from portfolio companies that demonstrate attractive distribution and monetization potential.”
- Vijay Valecha, Chief Investment Officer at Century Financial