Mezzan Holding bought the stake in Riyadh-based Al Safi, a food start-up established by Saudi Arabia's Al Faisaliah Group in 2014, for SAR90.75m (US$24.25m).
The Kuwait-listed giant operates in seven countries through 29 subsidiaries and employees. Including its FMCG and pharmaceutical operations, Mezzan distributes over 25,000 product lines.
Al Safi’s erstwhile parent Al Faisaliah Group, will retain 30% of the company’s stock following the sale
Garry Walsh, the company’s chief executive, said that Saudi Arabia represented a key growth market for Mezzan.
"The acquisition marks our real entry into the Kingdom's food manufacturing and distribution sector,” he said.
“Though the company was acquired while in a start-up mode, it has a high turnaround potential and will immediately provide a new platform for both margin growth and distribution scale, in addition to complementing our activities in other markets and contributing to the Group's bottom line starting from 2018 and beyond.”
The Al Safi purchase came as part of a three-pronged growth strategy that Mezzan will pursue until 2018. Its priorities are to streamline operations by managing expenses, introducing products manufactured by Mezzan from other countries and expanding new product lines in Kuwait, Saudi and neighbouring markets.
"By 2018, we expect our Saudi business to contribute 5-10% to our top line, and to grow there as the new Saudi-based food manufacturing facilities that we have planned start production,” Walsh added.
Al Safi, which will soon be renamed to Mezzan Food Company, will have the right to manufacture, market and distribute food products in Saudi Arabia.
The company was also awarded exclusive rights to continue to manufacture, market and distribute Al Faisaliah’s bakery and snacks line, as well as the exclusive rights to import, manufacture, sell and distribute all Mezzan Holding brands.