Al-Futtaim planning $500m of acquisitions in Middle East

©Sacha Orloff | May 2011

by Rorry Jones

Al-Futtaim Group, one of the Middle East’s largest conglomerates, expects to sign acquisitions worth more than US$500 million (Dh1.83 billion) in coming weeks as it expands in Saudi Arabia and elsewhere in the Middle East.

Marwan Shehadeh, the group’s director of corporate development, said the acquisitions would “complement” the group’s existing core businesses and raise its profile in Saudi Arabia.

“It is a priority for us to grow our Saudi auto business, and we are in the process of making a couple of acquisitions in the auto sector there,” Mr Shehadeh said. “Our aim and strategy is to become much more substantial in Saudi.”

Al-Futtaim hopes to acquire three companies in the Saudi automotive and retail sector at a cost of $100m, with a retail deal worth $400m in another country in the Middle East.

Mr Shehadeh said a further “big” deal was also being negotiated by the group’s property division.

“We no longer look for minority stakes or financial investments … What we do now is look for 100 per cent acquisition or controlling stake acquisitions of business,” Mr Shehadeh said.

The group has five core businesses – automotive, retail, financial services, property, and electronics and engineering – which it aims to expand in other countries.

The automotive business provides the largest part of the group’s revenues, dominating the UAE car market as the distributor of Toyota, Lexus, Honda, Volvo, Chrysler and Dodge vehicles.

The retail operations, which include the Ikea, Plug-Ins and Marks & Spencer brands, are the group’s second-largest earner, Mr Shehadeh said.

The company was closing two automotive deals that would make it the distributor of brands in Saudi Arabia but would remain a small player in the kingdom, Mr Shehadeh said.

“We already have some business in Saudi, but very small business. With these [acquisitions] it is going to be bigger but still quite small compared to the market and our size,” he said.

“It’s going to take time. It will take more than two acquisitions.”

The company is funding its aggressive expansion plans through a combination of equity and bank loans.

Al-Futtaim had not considered a share flotation or tapping capital markets on a group level, but bond issuances on an individual business level could be an option in the future, Mr Shehadeh said.

The company was expanding because of “huge” acquisition opportunities this year as businesses looked to dispose of non-core or distressed assets after the global financial crisis, he said.

“We have been more proactive in stating we want opportunities, and so people have been coming to us more often, and we have created a corporate development team to focus on this,” Mr Shehadeh said.

Al-Futtaim, which was founded more than 70 years ago, has more than 40 companies and 20,000 employees in at least 20 countries, making it one of the region’s most recognisable multinational brands.

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Filed under Luxury acquisition, Luxury Middle East

One response to “Al-Futtaim planning $500m of acquisitions in Middle East

  1. Pingback: Targets of Opportunity: The Region’s Top Investment Sectors | Invest Offshore

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