DUBAI: Arabian Centres, the Kingdom’s leading malls operator, is to raise up to $1.2 billion through a share listing on the Tadawul.
The initial public offering (IPO) for the 17-year-old company — the biggest in Saudi Arabia since 2014 — will be made to Saudi and foreign institutions, in a further test of the Kingdom’s attractiveness as an investment destination in the wake of Saudi Aramco’s successful bond.
Olivier Nougarou, Arabian Centres’ CEO, said that early marketing in London, New York and elsewhere had been positively received. “I’m convinced there is a strong interest,” he said, though he insisted the timing of the IPO had not been affected by the Aramco bond.
By the end of this month some 95 million new and existing shares could be listed on the Tadawul.
Individual Saudi citizens will be able to buy any shares that are left after the institutional offer.
Nougaro said it was too early to say precisely how much new money would be raised in the IPO, but he agreed with market estimates in the $1 billion to $1.2 billion range.
The cash will be used to pay down existing debt and — if there is any left over — to fund general corporate purposes, the company said, without yet disclosing the level of its indebtedness.
The issue will add significantly to Arabian Centre’s resources as it embarks on an expansion strategy prompted by economic transformation in the Kingdom.
It is planning four new malls to add to its current portfolio of 19, and is constructing cinemas in most of them. “We are very interested in cinema, and we are starting from scratch,” Nougarou said.
Arabian Centres has been operating in Saudi Arabia since 2002 under the Fawaz Al Hokair group, and runs three of the best known malls in the Kingdom — the Mall of Arabia in Jeddah, Mall of Dhahran and Nakheel Mall in Riyadh. It is twice the size of its nearest competitor.
Chairman Fawaz Al Hokair said: “By pursuing an IPO, we are laying the groundwork for the next chapter of our growth story and are offering investors — both domestic and international — the opportunity to invest in a dynamic company and industry well-positioned to benefit from the longer-term structural growth path within the retail sector in the Kingdom.”
A statement announcing the IPO said: “The company has a well-diversified and high-quality portfolio offering unique lifestyle experiences through a combination of super regional, regional and community centers and is home to over 1,000 renowned local, regional and international brands.
“The business model is underpinned by its category mix that comprises a full suite of lifestyle offerings ranging from food and beverage, entertainment, leisure, retail and other offerings underpinned by strategic relationships with key retailers, providing a lifestyle experience that targets a broad segment of the Saudi Arabian population,” it added.
The consumer market in Saudi Arabia has felt headwinds from low oil prices and government spending. Between 2016 and 2018 revenue growth rose by 6.2 percent to $576 million, with strong margins producing earnings before interest and tax of $374 million last year.
Several big existing shareholders, including members of the Al Hokair family, will hold on to their shares for the first six months of its life as a public listed entity.
A detailed prospectus is being prepared by a set of advisers, including Samba Capital as lead co-ordinator and manager, and US bank Goldman Sachs as “stabilising manager” to co-ordinate the final allotment of shares.
The Capital Markets Authority and the Tadawul have approved the offering.