Saudi Billionaires Found Holding Surging Savola Stock

In a commercial viewed more than 800,000 times on YouTube, an animated character named Sahsooh implores Saudi Arabian shoppers at the Panda grocery to seek alternatives to sugar, salt and fat.

“I, Sahsooh, pledge to be dedicated to the health of my fellow citizens by advising them to eat and drink what’s right for them,” he says, pacing atop a cartoon produce scale in a flowing white robe and open-toe sandals.

The healthy living campaign sponsored by Panda’s corporate parent, Jeddah-based Savola Group, Saudi Arabia’s biggest food company by revenue, faces an uphill battle. Fast foods and sugar-dense beverages are a leading cause of overweight Saudis, according to the Obesity Research Center at King Saud University. The Central Intelligence Agency says 33 percent of Saudi citizens are obese, on par with the U.S.

Changing tastes and a growing number of young consumers have helped boost Savola stock 38 percent this year. The jump has made billionaires out of longtime shareholders Abdullah Al Rabiah, the brothers Sulaiman, Essam and Emad Al Muhaidib, and members of the Al Issa family, who together control fortunes valued at more than $8.8 billion, according to the Bloomberg Billionaires Index.

Three Brothers

Al Rabiah, Essam and Emad Al Muhaidib have never appeared on an international wealth ranking.

“You see other companies in Saudi where the shareholders are selling, that’s not a good sign,” said Mohamed Tomalieh, an analyst at NCB Capital Co. in Riyadh. “It’s always a positive when you see major shareholders or founding shareholders holding on to their shares.”

Al Rabiah is Savola’s largest individual shareholder with an 8.2 percent stake, company filings show. The low-profile investor, who isn’t on the company’s board, didn’t respond to multiple phone calls for comment.

The three Al Muhaidib brothers collectively hold 14.3 percent of Savola through two family-owned entities, Al Muhaidib Holding and Abdulkadir Al Muhaidib & Sons Co.

Each brother owns more than a quarter of the family holding group, according to a 2013 prospectus. Emad and Essam Al Muhaidib have individual fortunes valued at $1.4 billion while Sulaiman Al Muhaidib’s net worth is at least $1.6 billion. Outside of Savola, the Al Muhaidib family owns stakes in more than 30 companies, including Riyadh-based Saudi British Bank, Al Khobar-based property developer Al Oula, and Dammam-based rice distributor Al Muhaidib Foods.

Giant, Panda

Al Muhaidib Group originated with a company started by the brothers’ late father, Abdulkadir, in 1946. It was first listed as a major shareholder in Savola’s 2009 annual report. The previous year, Al Muhaidib sold 80 percent of their grocery retailer, Giant Stores, to Al Azizia Panda United for an undisclosed price.

The Al Issa family, who have owned Savola stock for more than a decade, control 11.2 percent of the business through Riyadh-based MASC Holding, which stands for Mohammed Al Issa and Sons Co.

Mohammed Al Issa’s son, Ibrahim, serves as a Savola board member. Tarik Ismail, a spokesman for Savola, said Al Issa declined to comment when reached in March and didn’t respond to several e-mail and phone messages requesting comment about the company’s shareholders in October. Sulaiman Al Muhaidib, chairman of both Al Muhaidib Group and Savola’s board of directors, also didn’t respond to e-mails and phone messages.

Nick Farmer, a spokesman for Savola at Bell Pottinger in Dubai, said the company wouldn’t comment.

Edible Oils

Savola was founded in 1979 as Saudi Vegetable Oils and Ghee Co. as an importer and refiner of edible oils. Food manufacturing and wholesale sales remain its primary business, accounting for more than half of the company’s revenue. Retail sales make up 41 percent of its business, almost all of which is generated by its network of 260 Al Azizia Panda United food markets.

“The food and retail segments are growing at double digits,” said NCB Capital’s Tomalieh. “Those areas benefit from population growth, which right now is around the 2.5 percent mark in Saudi.”

Profit Rise

In a letter to shareholders in Savola’s 2013 annual report, Sulaiman Al Muhaidib praised the company for its 21 percent rise in annual profit “despite significant devaluation of currencies in Iran, Egypt and Sudan, an uncertain political environment, the weak security situation in Egypt and the fire incident that occurred in June of 2013 in the raw sugar warehouse.”

Savola fell 1.4 percent to 85.41 riyals at the close of trading in Riyadh.

With its burgeoning population and rising levels of disposable income, the growth potential of the Saudi food market is “unmatched” among the Gulf countries, according to a September 2014 report by New York-based consultancy Business Monitor International. A June 2014 report by auditor KPMG forecast that chocolate sales alone would grow 43 percent by 2016.

Savola sold almost 4.39 billion riyals ($1.17 billion) of sugar products in 2013, according to its annual report, and has hired JPMorgan Chase & Co. to advise on a possible bid for Kuwait Food Co. Also known as Americana, Kuwait Food had a market capitalization of $4.3 billion before it suspended trading on Sept. 16. The Safat, Kuwait-based business operates more than 650 KFC restaurants in the Middle East and North Africa.

‘Local Tastes’

Acquiring Americana would complement Savola’s fast-food business, Herfy Food Services Co., which operates more than 200 burger joints across Saudi Arabia. Styled as a Saudi answer to McDonald’s, Herfy touts its attention to “local tastes,” featuring menu items such as “chicken rings” -- similar to an onion ring, only made of chicken -- and the Herfy Frappe. Savola’s 49 percent stake in the publicly traded business is valued at about $630 million.

NCB analyst Tomalieh said Savola has recently renewed its focus on food, its primary business, while selling assets in unrelated industries, such as real estate. Last year the company acquired the Al Muhaidibs’ remaining 18.6 percent of the merged grocery business, as well as their 10 percent stake in an edible oil joint venture, in exchange for Savola stock valued at 1.33 billion riyals.

Savola also owns a 36.5 percent stake in one of its closest competitors, Almarai Co. The Riyadh-based company, which makes packaged food, juice and dairy products, is Saudi Arabia’s biggest food producer by market capitalization.

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