Saudi Arabia's Almarai acquires additional 15% stake in Modern Food Industries for $40m

Almarai's subsidiary Western Bakeries Company purchased the shares previously owned by Olayan Financing Company

A man looks at a dairy product produced by Almarai at a grocery in Riyadh, Saudi Arabia June 2, 2016. REUTERS/Faisal Al Nasser  - S1AETIRYYYAA

Saudi Arabia's Almarai, the biggest dairy company in the Middle East, acquired an additional stake in Riyadh-based snacks-maker Modern Food Industries amid a product diversification push.

Almarai subsidiary Western Bakeries Company purchased the stake owned by Olayan Financing Company for 150 million Saudi riyals ($40m), the company said in a filing on Sunday to the Saudi Stock Exchange, Tadawul, where its shares trade.

The diary company said it used its operating cash flow to fund the acquisition, with the financial impact expected to be reflected in its next quarterly results.

Following the deal, Western Bakeries Company owns 75 per cent of the Modern Food Industries.

Modern Food Industries was set up in 2009 in Saudi Arabia as a joint venture between Chipita, Almarai and the Olayan Group. With manufacturing plants in Jeddah, Al Kharj and Hail, it produces a variety of baked products from croissants to Swiss rolls under the brand name 7DAYS. The Saudi Arabia-based company also has operations in the UAE, Kuwait, Oman and Bahrain.

The region's food and beverage companies are increasingly evaluating acquisitions to drive growth, diversify their product range and expand their footprint to better deal with challenges arising from the Covid-19 pandemic.

In March, Almarai acquired Bakemart’s business in the UAE and Bahrain for $25.47m.

In April, the company said it spent 299.1m riyals on investment activities in the first quarter, although this was about 45m riyals lower than the same period last year before movement restrictions to stem the spread of Covid-19 were enforced.

Almarai's first quarter net income rose slightly to 385.9m riyals on a 1.46 per cent increase in revenue to 3.64bn riyals. The cash used in investing activities represented 8.2 per cent of the company’s revenue, it said at the time.

Earlier this month, Almarai said it plans to invest 6.6 billion riyals over the next five years to expand its poultry business across the kingdom. This came after it increased its stake in Pure Breed Poultry in August 2019 and acquired processed meat company Premier Foods earlier that year.

The move to expand the poultry segment is in line with Saudi Arabia’s aim of boosting its food security, with the help of the private sector.

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