Saudi’s Savola seeks Sanabel Al-Salam acquisition and Egypt expansion

Unnamed sources said that Savola, Saudi Arabia's largest grocery and food processing company, wanted to increase the quality and variety of the baked sweets it offers.

They told Reuters that the discussions were at an early stage, and there was no certainty that a deal will be reached. 

"Adding Sanabel Al-Salam to Savola's portfolio signals the company is hoping to expand, and improve its retail portfolio, and will also help eliminate some competition with its Panda bakery unit​," said one source. 

Savola owns Panda, the Middle East’s biggest supermarket chain, while Sanabel Al-Salam operates through 104 branches across the kingdom and a catering unit. 

The confectioner is owned jointly by Dubai-based NBK Capital Partners and Saleh Bin Nasser AlFarhan, who founded the business in 1995. 

Saudi retailers are currently being hit by reduced consumer spending due to low oil prices and government austerity.

Savola reported a 96% drop in first quarter profit this year, and though its second quarter was propped up by a one-off gain of SAR62m (US$16.5m) from the sale of a Dubai Panda outlet, profit continued to fall, with a 9.5% decline.

The Saudi giant also sold 2% of its shareholding in compatriot dairy producer Almarai, in a deal worth SAR1.12bn last month.

It was reported earlier this week that officials from Savola had met with Egypt’s trade and industry minister, Tarek Kabil, to discuss future investment plans in the country, where it manufactures products including sugar, vegetable oil and pasta.

Chief executive Bader Al Aujan said that the group was keen to strengthen its presence in Egypt’s market at a time when the government has been offering incentives to foreign businesses to expand in the country as part of an economic reform plan.

Savola has already invested EGP28bn (US$1.6bn) in Egypt—the most outside Saudi—on five plants and a transport and logistics network.