Almarai, one of the biggest dairy companies in the Middle East, acquired an additional 15% stake in Modern Food Industries. Reuters.
Almarai, one of the biggest dairy companies in the Middle East, acquired an additional 15% stake in Modern Food Industries. Reuters.
Almarai, one of the biggest dairy companies in the Middle East, acquired an additional 15% stake in Modern Food Industries. Reuters.
Almarai, one of the biggest dairy companies in the Middle East, acquired an additional 15% stake in Modern Food Industries. Reuters.

Markets

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

Deena Kamel
Deena Kamel

May 09, 2021

  • English
  • Arabic

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.

Teachers' pay - what you need to know

Pay varies significantly depending on the school, its rating and the curriculum. Here's a rough guide as of January 2021:

- top end schools tend to pay Dh16,000-17,000 a month - plus a monthly housing allowance of up to Dh6,000. These tend to be British curriculum schools rated 'outstanding' or 'very good', followed by American schools

- average salary across curriculums and skill levels is about Dh10,000, recruiters say

- it is becoming more common for schools to provide accommodation, sometimes in an apartment block with other teachers, rather than hand teachers a cash housing allowance

- some strong performing schools have cut back on salaries since the pandemic began, sometimes offering Dh16,000 including the housing allowance, which reflects the slump in rental costs, and sheer demand for jobs

- maths and science teachers are most in demand and some schools will pay up to Dh3,000 more than other teachers in recognition of their technical skills

- at the other end of the market, teachers in some Indian schools, where fees are lower and competition among applicants is intense, can be paid as low as Dh3,000 per month

- in Indian schools, it has also become common for teachers to share residential accommodation, living in a block with colleagues

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Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.

Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.

“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.

Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.

“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.

Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.

From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.

Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.

BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.

Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.

Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.

“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.

Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.

“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.

“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”

The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”

TEACHERS' PAY - WHAT YOU NEED TO KNOW

Pay varies significantly depending on the school, its rating and the curriculum. Here's a rough guide as of January 2021:

- top end schools tend to pay Dh16,000-17,000 a month - plus a monthly housing allowance of up to Dh6,000. These tend to be British curriculum schools rated 'outstanding' or 'very good', followed by American schools

- average salary across curriculums and skill levels is about Dh10,000, recruiters say

- it is becoming more common for schools to provide accommodation, sometimes in an apartment block with other teachers, rather than hand teachers a cash housing allowance

- some strong performing schools have cut back on salaries since the pandemic began, sometimes offering Dh16,000 including the housing allowance, which reflects the slump in rental costs, and sheer demand for jobs

- maths and science teachers are most in demand and some schools will pay up to Dh3,000 more than other teachers in recognition of their technical skills

- at the other end of the market, teachers in some Indian schools, where fees are lower and competition among applicants is intense, can be paid as low as Dh3,000 per month

- in Indian schools, it has also become common for teachers to share residential accommodation, living in a block with colleagues

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