Almarai in $1.5bn NFPC possible purchase

07-Jan-2016 - Last updated on 12-Jan-2016 at 08:28 GMT

Saudi food giant Almarai may buy a US$1.5bn stake in the UAE’s National Food Products Company (NFPC). (image:iStock.com)

Saudi food giant Almarai may buy a US$1.5bn stake in the UAE’s National Food Products Company (NFPC), as the Saudi firm ups its dividend payment and plans to boost its equity.

The deadline for potential bidders to register their interest in buying a stake in NFPC is this week, and so far Almarai is the only publicly-known possible bidder – although neither it nor NPFC have confirmed it is in the running. However, four anonymous sources told Reuters the Saudi firm was considering a bid late last month, along with other as-yet-unknown bidders.

NFPC part of investment plans?

The news agency said NFPC put a major stake of itself on the market in October last year, with up to 51% of the firm up for grabs. NFPC is one of the UAE’s largest food companies, with brands such as Lacnor, Milco and Oasis, and a joint venture with Danish dairy firm Arla.

Emirates Investment Bank is advising NFPC on the sale, along with legal firm Clifford Chance.

Almarai has pledged to spend US$5.6bn on a major investment programme over the next five years, with the aim of doubling its revenue by 2020. While the firm has so far focused on building out its own capacity, with massive new investments in its Alyoum poultry division especially, the firm may also consider acquisitions.

New shares, dividends and logistics

A move by Almarai last month to increase the number of its shares may also be part of its longer-term investment strategy. In what analysts described as an accounting move, the firm proposed creating 33% more shares, by giving current shareholders one new bonus share for every three they currently hold – while this wouldn’t affect the value of their shareholdings, it would allow the firm to make investments more easily.

In more definitively good news for Almarai’s investors, the firm also announced it would boost its dividend for 2015 to SAR1.15 per share. In total the firm said it would return almost US$184m to shareholders as a dividend for the year.

Almarai’s latest investment has been a new US$46m deal with Swisslog, a logistics automation firm based in Switzerland, to improve its distribution operations in Al Kharj. The five-phase project will be complete by the end of 2018, and will include a complete overhaul of the Almarai facility’s logistics facilities, including cranes, conveyers, and automated picking and loading modules.