Saudi companies look to build momentum from Aramco IPO

The Saudi Aramco IPO, which involved a 1.7% sale (3.45 billion shares), garnered the state firm $29.4 billion.

Sunday 01/03/2020
A view of the exchange board at the Stock Exchange Market (Tadawul) bourse in Riyadh displaying Aramco shares. (AFP)
Lot of momentum. A view of the exchange board at the Stock Exchange Market (Tadawul) bourse in Riyadh displaying Aramco shares. (AFP)

Some Saudi family-owned companies are hoping to build on the momentum from the success of the partial sale of Saudi Aramco to offer shares and list on the domestic stock exchange.

Saudi companies eyeing share flotations in 2020 include a leading health-care firm, a supermarket group, a real estate company, a meat processing firm and a fast-food burger chain — reflecting the Saudi government’s push for varied family-owned businesses to go public.

The government has encouraged family-owned companies to list on the domestic exchange, the Tadawul, to strengthen the kingdom’s capital markets as part of the country’s move to diversify its economy from oil-derived income, build local businesses and support the private sector.

The Saudi capital markets regulator, Capital Market Authority, relaxed the country’s traditional initial public offering (IPO) requirement to list at least 30% of a company as an incentive for family-owned entities to float shares on the Riyadh exchange.

A handful of family-owned companies put off IPOs until they saw how well the limited sale of state oil and gas giant Saudi Aramco was received and how the domestic bourse was able to handle the magnitude of that listing.

The Saudi Aramco IPO, which involved a 1.7% sale (3.45 billion shares), garnered the state firm $29.4 billion. None of the impending IPOs will come near to matching the Saudi energy conglomerate’s record earnings.

First among the Saudi family-owned companies to follow Saudi Aramco was the Dr Sulaiman Al Habib Medical Group (HMG), one of the largest private health-care firms in the Middle East, operating hospitals and clinics in Saudi Arabia, the United Arab Emirates and Bahrain.

The group began the institutional subscription phase of its IPO in February and is to run its retail subscription period until March 3, with listing on the Tadawul expected shortly after.

HMG is offering up 52.5 million shares, a 15% stake in the company. The medical group is looking at an IPO share price range of 43-50 riyals ($11.46-$13.33) a share with the goal of raising as much as $700 million.

BinDawood Holding, which owns the Danube and BinDawood supermarket brands, is reportedly planning to list on the Tadawul by the end of the current first quarter or second.

The Gulf country’s second-largest grocery retailer, BinDawood Holding operates 70 hypermarket and supermarket outlets throughout the kingdom. The company is expecting to bring in $400 million-$500 million from its IPO.

Bahraini private equity fund Investcorp acquired a minority stake in BinDawood Holding in 2016, which enabled the grocery retailer to move forward more aggressively with its expansion plans. Investcorp is rumoured to be exiting its stake in BinDawood as part of the IPO.

Another Saudi family-owned business, Supreme Foods Processing Company, is considering a second-quarter listing. Supreme Foods produces processed and cooked meat from two factories in the kingdom and one in the United Arab Emirates, with a delivery and distribution system that blankets the Arabian Gulf and extends elsewhere in the Middle East.

The food processing company falls under the umbrella of the Tanmiah Food Group, which is owned by the Saudi family conglomerate, al-Dabbagh Group. Supreme Foods is anticipating earning $80 million-$106 million from its partial sale.

Nawaf al-Fouzan, the founder and CEO of Saudi start-up Food Basics Company, recently disclosed that his firm was planning to list its Hamburgini brand on the Tadawul during 2020.

Hamburgini, which was introduced in Riyadh in 2013, is a fast-food chain specialising in quality, affordable burgers. It has 30 branches in the kingdom with short-term plans to add 13 locations.

In a tweet December 26, Fouzan suggested that the Saudi exchange allows for better growth opportunities and increasing market share for Saudi companies, which were several reasons for considering listing the Hamburgini brand.

Although most listings of Saudi companies occur on the main exchange, there are some firms that go public through the Tadawul’s Nomu Parallel Market, an alternative equity market established by the Tadawul in 2017 with lighter listing requirements compared to the main market.

The alternative platform is geared towards supporting small and medium-sized Saudi companies. Listing on Nomu requires a firm to have a minimum capitalisation of $2.6 million, a number of shareholders ranging from 35-50 and plans for at least a 20% share flotation.

One such Saudi firm that will be listing on the Nomu Parallel Market is Sumou Real Estate Company, with its IPO running through March 19.

The Saudi real estate development firm, which was founded in 2008 by Ayed bin Farhan al-Qahtani, is selling a 30% stake in the company, the equivalent of 7.5 million shares. At an IPO share price of $6.40, Sumou hopes to reap $48 million in sale proceeds.

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