Bateel International, the confectionery company in which French luxury group LVMH has a 26 per cent stake, is open to selling more stakes to strategic investors as it embarks on a $200 million (Dh734.5m) investment to finance expansion, its chief executive said.
“If we can find equity at a reasonable price we are happy to invite investors,” said Ata Atmar.
“When you grow very fast and get into large scale capacity building, equity is necessary because you can’t leverage too much.”
Bateel, which started in Saudi Arabia selling premium dates in 1992, is expanding its operations into Asia and may spend as much as $200m over the next three to four years, he said.
The private equity arm of LVMH, the owners of Louis Vuitton, bought a stake in Bateel in 2015 as the confectionery and restaurant chain company was undertaking expansion.
The majority of the company is owned by the Al Sudairi family from Saudi Arabia and they are open to relinquishing control of the company. The family owns the date farms in Al Ghat, around 250km away from the capital Riyadh.
“The shareholders are very open and they are not hung up on keeping control. With the right price, right strategy and right partner we are open to discussing various options,” Mr Atmar said.
The company, which had held discussions to go public, has put off the decision for now as it waits for better market conditions and focuses on expanding the business further.
The company had looked at London and Nasdaq Dubai to list its shares, but no decision has been made yet.
“We have had an interest from some markets that wanted us to go public but I think that is a few years delayed given the last two to three years of economic conditions in the region,” he said. “We are at least three years away before we are ready for an IPO given our business plans. We want to grow further to make it a substantial IPO event.”
The company continues to tap bank financing to fund expansion beyond the 16 markets where Bateel has franchises.
"Now we are growing through less capital intensive processes, whether through franchising or opening in duty free," he said. "To truly establish the kind of presence we have in the Gulf in other markets, we need capital. Capital will be important, but at what price?"
Currently 90 per cent of the business is generated in the Arabian Gulf but Bateel wants to expand further into Asia, particularly China.
The company is interested in franchising its date store concept because it is not capital intensive.
It is also planning to expand its product range, which includes dates to date syrup. The company has a capacity to produce 4,000 tonnes of dates a year.
"We can double our sales and we have the capacity to do that without significant investments, but going beyond that we need to lay the foundation capacity to produce value-added products and produce all dates," he said.
Bateel wants to diversify its sources of revenue because it has achieved growth in the Gulf and is looking for new income streams.
Last year, the company posted a 17 per cent increase in revenue, but profitability continued to suffer due to prevailing economic conditions. This was an improvement from 2015-2016 when top line slowed to 4 per cent and profit declined.
“Profit growth resumed in the first half of 2018 largely due to efficiency measures, but top line growth remains a challenge for the balance of the year,” he said. “Based on recent trends in business we expect solid improvement in both top and bottom lines next year.”
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