Saudi Arabia's BinDawood grocery retailer plans to list on Tadawul

The kingdom's third-largest grocery retailer will have a free float of 20% with the price to be set at the end of the book-building period

Bin Dawood Holding has 73 stores of which 51 are hypermarkets and 22 are supermarkets. Courtesy of BinDawood Holding

Saudi Arabia's grocery retailer BinDawood Holding Company plans to go public on the Saudi Stock Exchange, Tadawul, the company said on Monday.

The kingdom's third-largest grocery retailer will sell 22.86 million existing shares as part of the offering (IPO), representing about 20 per cent of its capital, BinDawood Holding said. The share price will be set at the end of the book-building period.

"Given the strong performance of the company and the circumstances with the Covid-19 ... many investors are looking for the best opportunities in the market and I believe that BinDawood Holding is one of those," Ahmad Abdulrazzaq BinDawood, chief executive of the company, said at a press conference on Monday.

"The appetite we have seen from the local and regional investors, especially from the Gulf and regional markets, it is amazing, and we have a very strong belief that it is going to be a very successful IPO."

The company forged ahead with its plans for an IPO, capitalising on a surge in demand for its online groceries delivery business during the coronavirus-induced restrictions in the kingdom.

The offering would follow the Tadawul listing in February of Dr Sulaiman Al Habib Medical Services Company, a healthcare group operating hospitals, medical centres and pharmacies, which raised $700.9 million (Dh2.57 billion). Saudi Arabia’s mortgage lender Amlak International for Real Estate Finance also raised $116m on Tadawul in July after floating 30 per cent of its total shares.

BinDawood Holding has 73 stores, of which 51 are hypermarkets and 22 are supermarkets, making it the third-largest grocery retail operator in Saudi Arabia by revenue as of December 31, 2019.

It operates mass mid-market supermarket chain BinDawood and high-end grocery brand Danube.

In the first half of 2020, BinDawood Holding recorded a 23 per cent increase in net income and 22 per cent rise in revenue compared to the same period last year. The increased profitability was driven by customers stocking up during the pandemic.

Goldman Sachs Saudi Arabia and JP Morgan Saudi Arabia are financial advisers, co-ordinators, bookrunners, and underwriters on the deal. GIB Capital and NCB Capital are also among the bookrunners. The National Commercial Bank and Al Rajhi Bank are receiving agents.

BinDawood Holding has seen "very strong appetite" from local, Gulf and European investors, Mr BinDawood said, noting the offering is open to international investors following approvals from the Capital Market Authority.

The company intends to float 20 per cent of its shares and 90 per cent of that will go to institutional investors and the remaining 10 per cent to retail investors, the CEO said. Proceeds from the IPO will be used to pay off existing shareholders. Significant shareholders include the BinDawood family and Investcorp, which acquired a stake in 2015.

The company has zero debt and a strong financial position with no immediate plans for borrowing. The retailer is open to international expansion given the right opportunity and price but has not made any decisions.

The grocery operator was able to offset the impact of VAT tripling to 15 per cent this year by increasing its market share during the pandemic, Mr BinDawood said.

Local demand remained strong as people did not go on vacation during the summer months due to the coronavirus pandemic, the executive said.

"Given the positive direction of the Saudi grocery retail sector, we believe our IPO will give new investors a solid platform for future capital growth," Mr BinDawood said.

Globally, the Covid-19 pandemic has caused a "significant slowdown" in activity in international IPO markets, according to the consultancy EY. The number of IPOs fell as much as 39 per cent in the second quarter to 186 listings, compared to 306 in the same period last year.

However, there were "clear signs" of recovery in June in global IPO markets, with investor demand focusing on technology, pharmaceutical and biotech businesses.

In the Middle East and North Africa (Mena), IPO activity was 11 per cent less by volume and 43 per cent by proceeds year-to-date in 2020. That was largely due to a drop in oil prices and the impact of the pandemic on companies' financial performance, EY said.

"In Mena, we expect investor sentiment to remain cautious in the second half of 2020 and IPO markets to take their time rebounding," the report said.