Taiba inks deal to buy Savola stake in KEC, Knowledge City Developers for SAR 459.3 mln

Savola owns an 11.47% stake in KEC - a direct ownership of 6.40% and an indirect ownership of 5.07% through Knowledge Economic City Developers (LLC).  

The deal is subject to a number of preconditions, including obtaining the necessary approvals from the regulatory or contractual authorities, in addition to obtaining shareholders’ approval in both companies due to the indirect interest held by some board members in the deal. 

In case either company is unable to obtain the relevant approvals within 120 days from the agreement signing date, the two parties may either cancel the transaction and terminate this agreement or extend it for an additional period. They can also partially cancel the deal based on a written agreement. 

The agreement includes guarantees and normal undertakings submitted by the two parties. 

On the other hand, the companies explained that the term related to availability of the last three years’ financial statements does not apply as the deal is a share sale and KEC is publicly-listed with financials available via the Saudi Exchange (Tadawul) website. In addition, Knowledge City Developers is a special purpose vehicle (SPV) that does not have any activity other than holding an investment in KEC. 

The deal will be financed through Taiba’s internal resources, in addition to bank credit facilities, Taiba indicated in its bourse filing, adding that the deal will further enhance its investments in other economically feasible entities that comply with its strategy. 

The relevant financial impact will represent an increase in the company's investments in the consolidated balance sheet to be issued after the deal closure and ownership transfer. The expected proceeds will appear in the statement of income.  

Related parties are Chairman Walid Al-Issa, board member Muhannad Al-Azzawi, and Assila Investment Co. (major shareholder in Taiba).  

A lock-up will be imposed on shares owned by KEC founders and, accordingly, on shares to be owned by Taiba by the virtue of the aforementioned sale and purchase agreement.  

On the other hand, Savola indicated that the book value of the total owned shares as per the latest unaudited financial statements for the period ended on March 31, 2022, amounted to SAR 376 million. 

The deal comes as part of Savola’s plan to exit investments in non-core sectors in light of its declared strategy to focus on its main operations in the food and retail sectors. 

Upon completion, the transaction is expected to generate cash inflows reaching SAR 459.26 million. The overall gain on this sale will near SAR 80 million, which will be recorded in total comprehensive income. 

The deal proceeds will be utilized in financing and supporting the group’s operations in line with its strategy. 

Related parties are Vice Chairman Bader Alissa, along with board members Mohammed Alissa and Mutaz Qusai AlAzzawi, as well as major shareholder Assila Investment. 

A lock-up will be imposed on shares owned by KEC founding shareholders, unless shares are sold to one of the founders or an institutional investor. As a founding shareholder, Taiba expects the sale process to run smoothly.

The deal implementation will start immediately after signing the agreement, and updates will be duly revealed.