Savola Group, one of the biggest names in the Saudi corporate landscape, will use the rights' proceeds to pay down debt and new investments. Image Credit: Supplied

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.

Get exclusive content with Gulf News WhatsApp channel

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: 

Almarai is one of the most recognisable F&B brands in the Gulf. In recent years, it has been expanding its product line-up too. Image Credit: Supplied
  1. Savola will distribute its entire 34.52% shareholding in Almarai to eligible shareholders, 'aiming to unlock value for Savola shareholders'.
  2. 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 also has eyes on a listing for its grocery retail brand Panda. Image Credit: Supplied

"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

- Waleed Khalid Fatani, CEO of Savola Group

'Unique transaction'

"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.

- Sulaiman Al-Muhaidib of Savola Group

"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.”

With the SR6 billion rights issue, Savola aims to bolster its financial standing, invest in its portfolio and reduce debt. Over the past year, Savola’s share price surged 60%, outperforming the Saudi market return of approximately 10%, excluding dividends. Sustaining this outperformance over the long term could yield significant benefits for investors. additionally the longer-term returns reached 9.4% gain over three years.

- Vijay Valecha, Chief Investment Officer at Century Financial