SAUDI ARABIA – Savola Group, a Saudi Arabian food processing company, is exploring options to sell its 34.52% stake in Saudi Arabian peer Almarai Co.
The stake is estimated to be worth around US$5.4 billion based on recent trading. Savola Group is said to be working with US investment bank Moelis & Co. to identify potential buyers for part or all of its stake in Almarai.
The talks are reportedly at an early stage, and a deal is not guaranteed.
“While no decisions have been made at this stage in relation to the potential sale of a portion of its stake in Almarai, this is one of such options under consideration,” the company said in a stock market filing.
Savola Group tends to invest in food and drinks businesses through its subsidiary, Savola Foods. The potential sale of its stake in Almarai is part of the company’s strategic considerations.
Savola’s exploration of a stake sale in Almarai comes as part of its ongoing strategy to optimize its portfolio and strengthen its core business operations.
In 2017, Savola Group sold a 2% stake in Almarai as part of its capital reallocation efforts. Last year, the company also divested stakes in Knowledge Economic City and its Moroccan unit.
In the group’s 2022 annual report, Chief Executive Officer Waleed Khalid Fatani said by exiting noncore sectors, Savola was able to build, expand and refocus its fundamental operations, while creating growth opportunities both domestically and internationally.
Almarai, the largest dairy firm in the Middle East, has a diverse product range, including fresh laban, cheese, juice, baked goods, and poultry.
The firm, which was initially established as a dairy company in the 1970s, has expanded into various areas, including bakery products and poultry. It is an influential player in the food and dairy industry in Saudi Arabia and the Middle East.
Earlier this month, Almarai approved an investment of SR405m to expand its bakery segment in light of recent growth.
The investment plan financed by the publicly-listed company’s internal cashflows, is expected to be completed over two years.
Almarai reported revenues of SR18.7bn for the fiscal year ended December 2022, an increase of 18.1% over 2021.
In 2022, the company’s operating margin was 12.2%, compared to an operating margin of 12.7% in the previous year. For the second quarter ended June 2023, the company reported revenues of SR4.8bn, a decrease of 5.4% over the previous quarter.
