Saudi Arabia's sovereign wealth fund, the Public Investment Fund, plans to buy a stake in the travel and tourism unit of Riyadh-based Seera Group Holding for more than 1.55 billion Saudi riyals ($414 million), as it seeks to diversify its portfolio.
The PIF signed a non-binding agreement to acquire a 30 per cent share in Almosafer Travel and Tourism Company, a subsidiary of Seera Group Holding, the company said in a filing to the Tadawul stock exchange on Tuesday.
The 1.5bn-riyal investment includes up to 386m riyals in an earn-out amount to be paid to Almosafer in subscription for new shares in the travel and tourism company.
Almosafer plans to use the investment to fund its expansion, invest in tourism assets and products, and improve customer experience.
“Almosafer aims to use the capital infusion to scale its inbound, outbound, religious and domestic tourism operations,” it said.
The PIF, which manages more than $620bn in assets, is diversifying its investment portfolio with forays into the capital markets as it seeks to grow its asset base to about $1 trillion by 2025.
The earn-out amount will be conditional on Almosafer achieving certain pre-agreed key performance indicators in the 2023 and 2024 financial years, according to the filing.
As part of a reorganisation plan, Seera’s destination management company Discover Saudi and its Hajj and Umrah B2B operator Mawasim will now fall under the umbrella of Almosafer.
“This travel platform will collectively capture domestic, inbound and religious opportunities,” it said.
The deal is subject to regulatory and other approvals while the signing of a definitive agreement depends on several conditions, including the completion of customary due diligence by PIF.
Saudi Arabia's international passenger traffic more than tripled in the first half of 2022 as the kingdom eased travel restrictions, hosted Umrah pilgrims and benefitted from a gradual rebound in demand for long-haul travel.
The number of international passengers through the kingdom's airports rose to 16.6 million in the first six months of the year, up from 4.5 million in the same period of 2021, Mohammed Alkhuraisi, vice president of strategy at the General Authority for Civil Aviation (Gaca), told The National last month.
International traffic has recovered to about 70 per cent of pre-pandemic levels in 2019, he said.
The country's Saudi Aviation Strategy seeks to triple annual passenger traffic to 330 million by 2030, as well as boost the number of destinations to 250, from 99 at present, and establish a new airline.
This strategy is backed by $100 billion in investment from the government and private sector.
Seera Group's gross booking value increased by 108 per cent, year on year, to 2.5bn riyals during the second quarter of 2022, due to high demand for travel across the inbound, outbound and domestic tourism sectors, it said last month.
The company generated a net loss after zakat (before non-controlling interest) of 68m riyals, narrowing its net loss from 99m riyals during the same quarter of the previous year.
The group's revenue rose to 569m riyals in the second quarter, up from 286m riyals in the same period last year, driven by increased demand for travel.