BinDawood IPO: Another mega listing in a globally accessible capital market

Four years ago, when Investcorp, the Bahraini-based leading private equity firm, acquired a minority stake in BinDawood Holding, I knew then that this family food retailer business would have an outstanding listing via initial public offering (IPO) on the Saudi stock market, “Tadawul.”

Since their first store opened in 1984 in Makkah, over time the holding company has emerged into two retail chains — BinDawood and Danube — spreading across 73 hypermarkets and supermarkets in major cities across the country, employing more than 10,000 people. They have been known for their commitment to quality products and customer service with value-added shopping experience and convenience in stores and via their online apps. Their board of directors include family members and international independent members as part of their corporate governance.

The shares of BinDawood were priced at SR96 ($25), which is at the top initial price range, giving the company a market capitalization of circa SR11 billion at the time of listing.

The company floated 22,860,000 shares, representing 20 percent of the issued share capital, with 90 percent allocated to institutional investors, locally and internationally, and 10 percent to 324,046 individual subscribers residing in the Kingdom.

Each retail subscriber received a minimum of seven shares while the remaining shares have been allocated on a pro-rata basis based on the size of each subscriber’s request compared to the total remaining subscribed shares.

The total offering was almost 50 times oversubscribed with received funds exceeding SR110 billion. To maximize its reach, locally and internationally, the management has appointed top-gun international investment banks as well as leading local advisers and receiving banks.

The listing of BinDawood is a case study of the critical role private equity firms may add to the readiness phase prior to any IPO. Typically, via a board seat participation, private equity firms work closely with the family business management to help implement their strategic plans, enhance the company’s value, optimize operations’ efficiencies and implement a best-in-class corporate governance protocol.

In recent years, I must admit that Investcorp’s performance has been impressive in spotting pre-IPO winning candidates and investing in them to unlock their potential values. This is the third successful exit in recent years for Investcorp in the Saudi-based family businesses.

Since the beginning of this year and through the pandemic’s impact on different sectors, the food and health care sectors sustained the crisis and have been at the top of the asset allocation model of funds managers, institutional investors and family offices in the Kingdom and abroad.

The BinDawood listing is the second above-the-SR2-billion-mark listing on Tadawul this year. The first one was Al-Habib Medical Group, a leading family business that built and operated a network of grade “A” hospitals across Saudi Arabia and the UAE.

In my opinion, apart from the healthy liquidity available in the Saudi market eyeing promising investment opportunities, what contributed to these IPOs’ stunning success is also the accessibility by international investors to the local capital market. The technological enhancement of Tadawul with its inclusion on global indices, such as FTSE Russel and MSCI, coupled with the listing of Saudi Aramco, have put it in the favorite list of emerging markets managers and sovereign funds executives.

Basil M.K. Al-Ghalayini is the chairman and CEO of BMG Financial Group.