BinDawood Holding, one of Saudi Arabia's biggest grocery retailers, is buying a majority share in its e-commerce partner International Applications Trading Company as it seeks to capitalise on the higher demand for online shopping.
BinDawood signed an agreement to acquire 62 per cent of IATC through its subsidiary Future Technology Retail, it said in a statement on Sunday to the Tadawul stock exchange, where its shares are traded.
As part of the transaction, Future Technology Retail will make an immediate payment of 107.5 million Saudi Riyals ($29m) to IATC, with additional payments in 2023 and 2026, subject to the achievement of certain revenue milestones.
“The acquisition of a majority stake in IATC is a major step towards enhancing our e-commerce offering and strengthening our omnichannel presence – enabling BinDawood Holding to control the future growth of its business in an increasingly digitally connected world,” Ahmad BinDawood, chief executive of BinDawood said.
“Expanding digital transformation and technical solutions is in line with Vision 2030. Saudi Arabia is among the largest and the fastest-growing e-commerce markets in the region, with e-grocery shopping still in a nascent phase. I am confident that this strategic acquisition will put BinDawood Holding in a prime position to capitalise on the growth of the sector.”
The total grocery retail market in Saudi Arabia is forecast to grow 2.8 per cent annually between 2020 and 2027 to reach 177.5 billion riyals, while total grocery e-commerce penetration is expected to grow to 3.5 per cent by 2027 from 0.8 per cent, BinDawood said, quoting data from Euromonitor and KPMG analysis.
The kingdom's e-commerce market, which grew about 60 per cent in 2019-2020 amid a digital surge that accelerated during the pandemic, is poised to hit $13.3bn by 2025, according to Boston Consulting Group and Meta Platforms.
BinDawood aims to capture 30 per cent of Saudi Arabia’s e-grocery market by 2028 as online sales continue to increase after the pandemic, it said.
As part of the transaction agreement, the founder and the management team of IATC will remain with the company and BinDawood will invest a further 160m riyals in IATC over a two-year period to “support the development of the platforms and the roll-out of a network of state-of-the-art dark stores and fulfilment centres to optimise operations, fully integrate the customer experience and provide shorter lead delivery times,” the company said.
The transaction, subject to customary closing conditions and completion of regulatory approval, is expected to close in the second half of 2022.
The volume of merger and acquisition deals in the Middle East and North Africa surged 66 per cent last year as the region's economies charted a strong recovery from the pandemic.
Last year, 661 transactions worth $99bn were completed, compared with 397 deals worth $85.2bn in 2020, according to Ernst & Young.
The UAE registered the highest deal activity in terms of volume with 303 transactions, while Saudi Arabia attracted the most M&A capital, worth $47.4bn, according to the consultancy. Egypt, the Arab world's third-largest economy, also reported robust activity in 2021 with 118 deals worth $7.7bn.
