Saudi Arabia's Dur Hospitality and Taiba Investment enter into $2.4bn merger talks

Preliminary discussions may not lead to a deal, the companies say

Saudi Arabia-based hospitality companies said if they reach an agreement, the potential merger will be subject to conditions and approvals of the regulators and shareholders. Getty

Saudi Arabia-listed Dur Hospitality Company and Taiba Investment Company are studying a potential merger that could create a $2.4 billion company in the kingdom's hotels, tourism and property market.

If the companies reach an agreement, the potential merger will be subject to approval by regulators and shareholders, the companies said in separate statements to Saudi stock exchange (Tadawul) on Sunday.

"These discussions do not mean necessarily that [a] merger will take place between the two parties," the companies said, without providing further details.

The move comes amid a flurry of merger and acquisitions activity in the kingdom and wider Gulf region, with companies seeking to streamline their operations as they emerge from the Covid-19 pandemic.

Riyadh-based Dur Hospitality, which was established in the 1970s, has a market capitalsiation of $923m, according to the Tadawul.

The company develops, owns, manages, buys and invests in hotels, restaurants, hotel suites, guest houses, entertainment centres and travel agencies, according to its 2020 annual report. Its hotel brands include Makarem, Marriott, InterContinental Hotels Group, hotel apartments company Shada Hospitality and serviced apartments brand Dara.

It also provides services to Umrah pilgrims, in addition to developing residential, commercial and hotel buildings. Its portfolio includes 30 properties ranging from hotel facilities to residential compounds.

In 2020, hospitality activities contributed 73 per cent of its total revenue while rents contributed 27 per cent, according to its annual report. In terms of cities, its Riyadh operations contributed the most to its annual revenue, followed by Makkah and Tabuk.

Dur Hospitality's main shareholders are Assila Investment Company with a 27.14 per cent stake, the Public Investment Fund with

16.62 per cent stake and Mohammed bin Ibrahim Al-Issa with 12 per cent, according to exchange data.

The company's net profit after zakat and tax fell 83 per cent to 1.87 million Saudi riyals in the first quarter of 2021, compared with the same period last year, due to a decrease in hospitality revenues from the impact of the Covid-19 pandemic, it said.

Taiba Investments is a general investment company that also owns a number of hotels. The company, which last month bought two Centro-branded, Rotana-managed hotels in Riyadh and Jeddah from Shuaa Capital for 328m riyals, has a market cap of about $1.44bn. Assila Investments is also its biggest shareholder.