For Ahmad BinDawood, last year’s stock offering in the eponymous Saudi grocery store was a chance to shape his legacy in the family business he has worked in since the age of eight, while also cementing a fortune. $ 3.1 billion built over decades by his father and uncles.
As BinDawood Holding Co.’s October public offering began, details emerged of some $ 76 million in previously undisclosed loans made by the Saudi company to family members. Breaking the traditional secrecy associated with the kingdom’s family businesses, Jeddah-based BinDawood has revealed everything, suspended the IPO and given buyers the chance to get their money back.
As the loans were quickly repaid, the sale resumed and eventually raised around $ 500 million for the family, attracting $ 29 billion in offers along the way.
“We have to be very transparent with investors,” BinDawood said in an interview in Riyadh last month. “If there is any disclosure at any time that we need to make, we will go ahead and do it. So we took this on the shoulder and decided to announce it.
The success of the IPO helped make BinDawood, 37, one of the new Saudi executives emerging in a corporate world largely off limits to foreigners until a few years ago. Moreover, it made it emblematic of a desire to shake up traditional ways of doing business, in keeping with Saudi Crown Prince Mohammed bin Salman’s goal of turning the oil-rich kingdom into a regional business center. .
This mold breaking character can even be seen in BinDawood stores. In recent months, the company has made major promotions for Valentine’s Day and Easter, a move that was unthinkable just a few years ago in a country that has always adhered to a strict Wahhabist interpretation of Islam.
Prince Mohammed’s commitment to reshaping the economy does not all work in BinDawood’s favor. A sudden decision to triple the value added tax last year affected consumer spending. Rising tariffs and fees for expatriates are also driving up costs for Saudi businesses. And all this at a time when the Covid-19 pandemic is fueling unemployment.
“We remain cautious about medium to medium term growth in the consumer space as the market size shrinks due to the potential depopulation of expatriates,” said Mehwish Zafar, senior equity analyst at Arqaam Capital in Dubai. , which issued a “hold” recommendation on the shares. Like-for-like sales growth will likely be negative until at least 2022, he said, with growth coming only from new store openings or acquisitions.
BinDawood shares jumped more than 30% in the days following the sale. They have since retreated, posting a gain of around 11.5% from the listing price on Monday.
It was a performance that helped underpin the family’s attempt to diversify into other assets while strengthening its core business, a goal identified by Ahmad BinDawood as being essential to avoid the kind of conflict his father feared. not undermine the business as it moved on to a new generation.
“The majority of family businesses don’t survive the transition to the third generation, and that’s something my father was very concerned about,” BinDawood said.
Progress of the pilgrims
It took about 40 years to ramp up the BinDawood business. Formerly a small seller of Arab perfumes and groceries to pilgrims visiting Islamic holy sites in Mecca and Medina, it is now a national enterprise covering supermarkets and hypermarkets, hotels and distribution centers. The grocery store alone employs more than 10,000 people in 74 stores.
Ahmad BinDawood’s fate was sealed as soon as his father, Abdulrazzag BinDawood graduated in the 1980s from King Fahd University of Petroleum and Minerals in Dhahran. Instead of following his peers in the oil industry, he decided to join his brothers Ismail and Abdullah in their booming retail business.
That’s why Ahmad found himself on the front lines at such a young age. At just eight, he was helping sell items to pilgrims during his school vacations, envious of friends who were away to avoid the scorching Saudi summers.
“Our friends were traveling and having fun and sometimes we wondered: why not us?” BinDawood said. “But this experience built the passion in us to stay in the company that our father and our uncles built.
The decision to embark on online shopping and delivery helped prepare the business for lockdowns during the coronavirus pandemic, but could not offset the blow caused by the absence of religious tourists who were barred from entering. ‘enter the kingdom for much of the year. While profits climbed nearly 7% last year, they fell more than 53% in the fourth quarter as Saudi Arabia reimposed travel restrictions.
BinDawood is still optimistic that buyers will return as the trip picks up, although it remains uncertain how quickly pilgrims return to Saudi Arabia in something like their previous figures.
The next step could be the purchase of a rival grocery chain to expand into neighboring countries, BinDawood said. At the same time, the proceeds from the IPO will help further develop the BinDawood Group family office, which Ahmad’s father currently runs. This fortune, which is divided among several family members, is estimated at around $ 3.1 billion, according to the Bloomberg Billionaires Index.
“The IPO had two main angles: sustainability and business continuity first, and then diversification for the family,” he said. “We are in the process of building the family office and recruiting the right talent.”
More family businesses will likely follow in BinDawood’s footsteps. Saudi Aramco’s 2019 IPO, which many Saudis never thought they would see, “has been a massive driver in motivating families to go public with their operating businesses to help them grow their businesses and generate revenue. new riches, ”said Tayyab Mohamed, co-founder. London-based family office recruiting firm, Agreus Group.
Despite all the challenges, Ahmad BinDawood is optimistic, citing his lifelong involvement in the company as the basis for success.
“Retail is now part of our DNA,” he said.
(Updates stock performance in the ninth paragraph.)