Saudi Arabia’s Savola to buy snack maker Bayara for $260m in share-purchase deal
▶ Grocery sales were lower than during last year’s restrictions but supplies to hospitality sector were up by 50%
Saudi Arabia’s Savola Group has signed a binding share-purchase agreement through its subsidiary, Savola Foods Company, to acquire nuts company Bayara Holding for $260 million.
The food conglomerate will pay cash for 100 per cent of Bayara’s issued share capital, it said in a filing yesterday to the kingdom’s stock exchange, the Tadawul.
“This acquisition is a continued activation of Savola Foods Company’s announced strategy to enter attractive, value-added categories with increasing appeal within the food sector,” Savola said in the filing.
Savola will finance the $260m transaction through a combination of operating cash flows and available bank loans, it said.
The group appointed Ernst & Young as its financial adviser on the deal, it said.
The proposed acquisition is subject to the approval of the General Authority for Competition and other relevant regulatory authorities, the company said.
Snacks maker Bayara specialises in the production of nuts, spices, grains, pulses, dried fruits and dates, processing about 23,000 tonnes of goods a year, according to its website.
The company is based in the UAE and Saudi Arabia, with operations in both Dubai and Riyadh.
Established in 1992 under the brand name Gyma, it rebranded as Bayara in 2013. The privately held business employs more than 900 workers, according to its LinkedIn profile.
Savola, which was established in 1979, focuses on consumer staples such as edible oil, sugar, pasta and ghee. It harbours plans to expand into higher-value product categories.
The food conglomerate holds a 34.52 per cent stake in Saudi Arabia’s Almarai, the biggest dairy company in the Middle East, according to its website. It also has a 51 per cent stake in Al Kabeer Group, one of the largest frozen food manufacturers in the region.
Savola Foods owns operations in seven countries, including Egypt and Sudan. It also manages a broad portfolio of business-to-consumer food brands, which are on supermarket shelves in 50 countries, according to its website.
The Savola Group’s net profit after zakat and tax for the first quarter of 2021 dropped by 11 per cent, compared with the same period in the previous year, to 153.8m Saudi riyals.
This was owing to lower sales and margins in the retail sector, a lower share of profits from associates, higher operating expenses and higher zakat and income-tax expense.
The group’s first-quarter revenue stood at 5.95bn riyals, up 0.5 per cent from 5.92bn riyals in the same quarter a year ago.
Food and beverage companies in the region are increasingly evaluating acquisitions and product diversification to boost their standing in a market that has previously relied heavily on food imports.
Almarai in May said it plans to invest 6.6bn Saudi riyals ($1.76bn) over the next five years to expand its poultry business across the kingdom. Also in May, it acquired an additional stake in Riyadh snack maker Modern Food Industries amid a product diversification push.
Abu Dhabi’s Agthia Group, one of the Mena region’s top food and beverage companies, recently completed its acquisition of Jordan’s Nabil Foods, a processed meat business. It also merged with date-processing company Al Foah.
Agthia this year also agreed to buy 75 per cent of Egypt’s Ismailia Investments, or Atyab, which makes frozen meat products. The deal is valued at $205m, Agthia said.
Savola, established in 1979, focuses on consumer staples such as edible oil, sugar, pasta and ghee
Saudi Arabia’s Almarai, the biggest dairy company in the Middle East, has reported a 25 per cent slump in second-quarter net profit owing to lower sales.
Net income attributable to the company’s shareholders for the three months up until the end of June slipped to 482 million Saudi riyals ($128.6m), down from 644m riyals in the same period in 2020, Almarai said in a statement to the kingdom’s Tadawul stock exchange, where its shares are traded.
Second-quarter revenue fell by 1.87 per cent on the same period a year earlier to 4.1 billion riyals, which the company said was owing to differences in buying patterns.
Retail sales suffered “double-digit” declines, compared with a year ago when grocery purchases were higher as a result of the pandemic and before the kingdom’s VAT rate was tripled on July 1.
However, food service sales to restaurants and hotels are up 50 per cent this year as businesses reopen.
“Almarai faced a challenging quarter due to the base-year effect of Covid-19 and VAT rate change purchases last year,” the company said yesterday.
Revenue declined by 7.9 per cent in Saudi Arabia and by 4.2 per cent in other GCC markets during the quarter.
However, in contrast it surged 42.2 per cent outside the GCC region mostly thanks to “stellar performances” in Egypt and Jordan.
The profitability of its dairy and juice business was affected by higher imported alfalfa costs and lower subsidies, the company said. The bakery business reported a 9.4 per cent drop as school closures continued, while the poultry unit had a 45.1 per cent slump in income.
The company’s quarterly selling and distribution expenses declined by 5.6m riyals, or 0.5 per cent on a yearly basis, as a result of “strong cost controls”. Its general and administrative expenses fell by 1.3 per cent from a year ago. However, other expenses rose by 19.5m riyals.
Despite the “challenging” conditions, Almarai said it is gaining market share.
“With looming school openings in the second half and continually improving vaccination rates in [the] GCC, Almarai expects an improved trading and travel environment across GCC and, in particular, in Saudi Arabia,” it said.
The company continues to invest in growth. It plans to plough 6.6bn riyals into the expansion of its poultry business across the kingdom over the next five years. Its board has already approved the investment, which will help to double its market share in the segment, it said in May.
The dairy company has also been on an acquisition spree in recent months. It revealed plans in June to buy Binghatti Beverages Manufacturing’s production complex in the UAE for Dh215m ($58.54m) as it continues to expand its product range.
It plans to fully finance the deal through its operating cash flows.
Last month, Almarai’s subsidiary Western Bakeries Company bought an additional stake in Riyadh snacks maker Modern Food Industries for 150m riyals. This took its stake in Modern Food to 75 per cent, Almarai said on May 9.
Almarai also acquired Bakemart’s business in the UAE and Bahrain for $25.47m in March.