JEDDAH, 12 April 2005 — The Saudi Dairy and Foodstuff Company (SADAFCO) will start offering 30 percent of its existing shares to Saudi investors at SR260 per share from April 25, the company announced yesterday.

Of the 1.95 million shares out of its total 6.5 million existing shares, 10 percent or 195,000 shares have been offered to institutional investors and 90 percent or 1,755,000 shares to individuals.

“The initial public offering (IPO) of SADAFCO shares provides an opportunity for Saudi investors to share in the success of a company that has a solid track record of growth year after year,” SADAFCO Managing Director Ahmed Mohammed Hamid Al-Marzouki told a press conference here yesterday.

The National Commercial Bank (NCB), the lead manager, will underwrite the transaction. The NCB also acts as financial adviser.

The subscription offer will remain open for 10 days until May 4. Share allocations will be announced on May 8.

“The IPO of SADAFCO shares is a pioneering event because it’s the first time in the Kingdom’s history that a fully underwritten offer of shares in a private company has been determined by a book-build process among institutions,” Al-Marzouki said.

The book-build process involves institutional investors placing bids for shares within a specified price range with the final share price set by agreement between SADAFCO and the lead manager for the financial transaction, he added.

“The combination of SADAFCO becoming a public company via the IPO, full underwriting by the NCB and the book-build process to determine the offer price, make this listing on the Saudi stock market a pioneering event,” he said.

The IPO is the logical step for SADAFCO as the company moves to consolidate its position as the regional leader in the dairy and foodstuff market, he added.

The company converted to a joint stock one in 2000 and is now looking to benefit from a stock exchange listing. The benefits of listing on the Saudi stock market include an enhanced ability to raise capital in the future and greater visibility and transparency in the public eye. “Investors will benefit from an ability to buy and sell shares (liquidity) in a company whose products include the Saudia milk range,” Marzouki added.

Asked whether the IPO involves the issue of new shares, Marzouki answered in the negative. “The IPO of SADAFCO shares involves the divestment of existing shares by existing shareholders. No new shares will be issued,” he said, adding that the IPO is not a capital raising exercise for SADAFCO.

The issue price has been determined at SR260 per share. “If the share offer is undersubscribed, the underwriter NCB will buy the balance of the shares. In the event of oversubscription, shares will be allocated on a pro-rata basis,” Al-Marzouki said, adding that women can also buy shares.

Answering a question whether the IPO represented an exit strategy for the existing shareholders, he said: “No, United Industries Company (UIC) will remain the major shareholder (40 percent ownership) after the IPO.”

Explaining the company’s plans for the funds gained from the IPO, he said: “SADAFCO will not raise capital from the IPO because no new shares are being issued. Certain shareholders are selling a portion or all of their existing holdings. The entire proceeds of the offer (after deducting all costs related to the offer) will be paid to the selling shareholders.”

Asked whether SADAFCO would raise capital in the future, Al-Marzouki said: “As the company develops, a public offering will be one way of raising capital. Other capital raising methods include utilizing existing credit lines and facilities extended to the company by several leading banks in the Kingdom.”

The public can collect application forms to subscribe shares from the NCB’s branches or at the branches of receiving banks that include Samba Financial Group, Al-Rajhi Banking and Investment Corp. and Banque Saudi Fransi.

Individual applicants must apply for at least 10 SADAFCO shares, and after that in multiples of 10 up to 1,000 shares. However applicants may be allocated fewer shares in the event of oversubscription.

On May 8, four days after the subscription period closes, the bank where applicants submit their application form will notify the number of shares they have been allocated.

Excess funds invested will be returned on May 9 and share trading will commence a few days later.

“SADAFCO has solid business prospects and is strongly positioned in growth markets such as dairy and juice products, and tomato paste,” Al-Marzouki said, adding that the company also has a wide distribution network extending to Sudan, Oman, Yemen, Syria, Jordan, Lebanon and Kuwait.

According to him, SADAFCO has a proven track record of growth and profitability, and significant cost savings are being achieved through the consolidation of manufacturing facilities to two locations in Jeddah and Dammam, rebalancing of equipment for optimal usage and in the fine turning of manufacturing processes.

With SADAFCO now moving from a closed joint stock company to a publicly traded one, thus becoming more financially flexible, it may consider further acquisitions as long as it provides benefit to the company and value to its shareholders, Al-Marzouki sadded.

SADAFCO, which has a ‘Saudi first’ policy on employment, will continue to invest in the Saudi community through a wide range of corporate social responsibility activities, he said. The company currently employs over 2,000 people.

Asked to comment on the company’s plans to launch a diabetic milk product, Al-Marzouki said: “ SADAFCO is known for its innovative products. It may launch diabetic milk by the year-end.”