FAQs about Savola’s rights issue, distribution of Almarai shares

Savola headquarters

Savola Group’s plans to offer SAR 6 billion rights issue and distribute the entire stake in Almarai Co. involves three stages, the edible oils producer said.

The Tadawul-listed firm intends to issue rights shares, followed by a capital reduction, and later distribute the group’s entire stake of 34.52% in Almarai to Savola’s eligible shareholders.

The three stages remain subject to approvals from the regulatory authorities and Savola shareholders, the group said, adding that material updates will be disclosed.

Savola said that the goal of this process is to maximize the investment value for shareholders, as the market value (market capitalization) of Savola over the past years was almost equal to the market value of its share in Almarai.

Savola holds sufficient cash flows from its operations to meet its existing financial obligations, including debt covenants and terms specified by lenders, it added.

The exact valuation related to the rights issue has not yet been determined and will be disclosed after regulatory approvals, the company added.

There will be no dilution in the ownership percentage for Savola shareholders who participate in the rights issue process, except that they will receive shares in Almarai. However, non-participating shareholders will obtain a smaller number of Almarai shares compared to the participating shareholders.

Non-participating shareholders will also face a dilution in the percentage of their ownership in Savola. They will benefit from the opportunity to sell their letter of rights—the value of which will be determined as the transaction progresses.

“Almarai is accounted as an investment in associate. Income from Almarai flows within Savola’s operating income,” the company explained.

Savola's investment in Almarai is considered one of its most successful investments to date, as the value of Savola's investment in Almarai has multiplied more than 100 times since the first investment in 1991. Savola's market value during the past years was directly related to the value of the share held by Savola in Almarai.

Going forward, Savola will focus on investing in the growth of its core food and retail businesses and shareholders will continue to benefit from direct exposure to this growth too, the company said.

It will also continue to review strategic options to realize value from portfolio companies that demonstrate attractive distribution and monetization potential.

Savola's future investment vision, upon completing the process, includes the following:

- To be the leading company in the fast-moving consumer goods (FMCG) sector across Saudi Arabia, and Middle East, North Africa and Turkey (MENAT) region.

- Resilient business model prioritizing resources to focus on core operating business with growth potential.

- Strengthening cash flows with the aim of optimizing the capital structure and dividend distributions.

- Supporting the future M&A strategy and providing the necessary liquidity to finance acquisitions.

The company's board of directors recommended, on Feb. 6, to increase its capital by SAR 6 billion through a rights issue, which will allow Savola to strengthen its financial position and continue to invest in growing its portfolio, while paying down its debt. It will also enable the company to distribute its stake in Almarai, according to data available to Argaam.

Following the rights issue, Savola intends to distribute its entire 34.52% stake in Almarai to Savola’s shareholders, subject to securing the necessary approvals from the relevant regulatory authorities and shareholders.