Billionaire Saudi Family Breaks the Mold on Kingdom’s Secrecy
For Ahmad BinDawood, last year’s share offering in the eponymous Saudi grocery business was a chance to shape his legacy at the family firm he’s worked at since the age of eight, while cementing a $3.1 billion fortune built over the decades by his father and uncles.
As the October public offering of BinDawood Holding Co. got
underway, details emerged of some $76 million in previously undisclosed loans
made by the Saudi company to family members. In a departure from the
traditional secrecy associated with the kingdom’s family firms, Jeddah-based
BinDawood revealed everything, put the IPO on hold and gave buyers the chance
to take their money back.
As the loans were quickly repaid, the sale resumed and
eventually raised about $500 million for the family, attracting $29 billion in
bids 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 has helped establish BinDawood, 37,
as one of a new breed of Saudi executives rising within a corporate world that
was largely off-limits to foreigners until a few years ago. What’s more, it has
made him emblematic of a drive to shake up traditional ways of doing business,
dovetailing with Saudi Crown Prince Mohammed bin Salman’s goal of transforming
the oil-rich kingdom into a regional business hub.
That mold-breaking character can even be seen inside
BinDawood stores. The past few months have seen the company doing prominent
Valentine’s Day and Easter promotions, a move unthinkable just a few years ago
in a country that has historically adhered to a strict Wahhabist interpretation
of Islam.
Prince Mohammed’s commitment to reshaping the economy isn’t
all working in BinDawood’s favor. A sudden decision to triple value added tax
last year hit consumer spending. Higher customs duties and fees on expatriates
are driving up costs for Saudi firms, too. And all at a time when the Covid-19
pandemic has been stoking unemployment.
“We remain cautious of near-to-mid term growth across the
consumers space as market size shrinks on potential expat depopulation,” said
Mehwish Zafar, a senior equity analyst at Arqaam Capital in Dubai who has a
“hold” recommendation on the shares. Like-for-like sales growth will probably
be negative until at least 2022, he said, with growth only coming from new
store openings or acquisitions.
Shares in BinDawood jumped more than 30% in the days
immediately after the sale. They have since slipped back, showing as of
Thursday a gain of about 11.5% from the listing price.
It’s a performance that has helped buttress the family’s bid
to diversify into other assets while strengthening the core business, a goal
identified by Ahmad BinDawood as key to avoiding the kind of strife his father
feared might undermine the business as it passed to a new generation.
“The majority of family businesses don’t survive the
transition to the third generation, and that’s something that concerned my
father a lot,” BinDawood said.
Pilgrims Progress
The rise of the BinDawood business has been some 40 years in
the making. Once a small-time vendor of Arabian perfumes and groceries to
pilgrims visiting the Islamic holy sites of Mecca and Medina, it is now a
nationwide concern spanning supermarkets and hypermarkets, hotels and
distribution centers. The grocery business alone employs more than 10,000
people across 74 stores.
Ahmad BinDawood’s own destiny was sealed as soon as his
father, Abdulrazzag BinDawood graduated in the 1980’s from the King Fahd
University of Petroleum and Minerals in Riyadh. Instead of following his peers
into the oil industry, he decided to join his brothers Ismail and Abdullah in
their burgeoning retail trade.
Which is why Ahmad found himself on the front line at such a
young age. At just eight, he was helping to sell items to the pilgrims during
his school holidays, envious of friends who were away avoiding Saudi Arabia’s
scorching summers.
“Our friends were traveling and off enjoying themselves and
sometimes we would would ask: why not us?” BinDawood said. “But that experience
built the passion in us to stay in the business that our father and our uncles
built.”
A decision to push into online shopping and delivery helped
prepare the firm for lockdowns during the coronavirus pandemic, but couldn’t
outweigh the hit from the absence of religious tourists who were prevented from
entering the kingdom for much of the year. While profit climbed almost 7% last
year, it had slumped more than 53% in the fourth quarter as Saudi Arabia
reimposed travel restrictions.
BinDawood is still optimistic that shoppers will return as
travel resumes, though how quickly pilgrims come back to Saudi Arabia in
anything like their previous numbers remains uncertain.
Next up may be the purchase of a rival grocery chain to
expand into neighboring countries, BinDawood said. At the same time, the IPO
proceeds will help further develop the BinDawood Group family office, which
Ahmad’s father is now running. That fortune, which is split across several
family members, is estimated at about $3.1 billion, according to the Bloomberg
Billionaires Index.
“The IPO had two main angles to it -- sustainability and
continuity of the business first, and second the diversification for the
family,” he said. “We are in the process of building the family office and
bringing in the right talent.”
More family businesses are likely to follow in BinDawood’s
footsteps. The IPO of Saudi Aramco in 2019, which many Saudis never thought
they would see, “has been a massive driver in motivating families to take their
operating businesses public to help grow their enterprises and generate new
wealth,” said Tayyab Mohamed, co-founder of London-based family office staffing
firm, Agreus Group.
For all the challenges, Ahmad BinDawood is optimistic,
citing his life-long involvement in the business as a foundation for success.
“Retail is embedded in our DNA now,” he said.
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