Saudi firms in talks to create retail powerhouse

Cenomi Centers

• Cenomi Retail and Cenomi Centers in early talks on potential merge
• Both companies announced a full rebrand in December
• Saudi’s retail sector set to grow at 6.5% a year until 2026

Talks are under way for a potential merger between Saudi Arabia’s largest franchise retailer and shopping mall developer and operator.

Cenomi Retail, formerly known as Fawaz Abdulaziz Alhokair Company, said in a filing to the Saudi Stock Exchange that it is in discussions with Cenomi Centers, also known as Arabian Centres Company, to create a new retail powerhouse.

Discussions remain at an early stage and the parties have not yet reached an agreement on whether to proceed with any transaction, according to the statement published on Sunday.

• Cenomi in bid to shake up kingdom’s online retail industry
• Cenomi rolls out Subway sandwich chain in Saudi Arabia
• Global luxury fashion brands look to the Gulf for growth in 2023

It added that the talks “aim to assess the feasibility of the potential transaction and the possibility of achieving benefits for both companies’ shareholders”, without giving further details. 

Both companies announced a full rebrand in December under the newly created Cenomi Group, aimed at positioning the company at the heart of consumer lifestyle in the kingdom. 

While Cenomi Group is a private family company and does not disclose its financials, Cenomi Retail and Cenomi Centers are listed on Saudi Arabia’s Tadawul and both share prices fell slightly following the announcement.

Cenomi

Cenomi Retail is active in 1,500 stores across 100 shopping malls in 11 countries and Cenomi Centers has a portfolio of 21 assets located in 10 major Saudi cities attracting over 109 million visitors a year.

Cenomi Centers posted a 45 percent jump in net profit to SAR837 million ($223.2 million) in 2022 on revenue of nearly SAR1.7 billion, while Cenomi Retail reported a net profit of SAR94.6 million, up 14.5 percent year-on-year, on revenue of SAR4.5 billion.

The merger talks come at a time when experts predict that Saudi’s retail sector is set to grow at a compound annual growth rate of 6.5 percent until 2026 to become a $176.5 billion market.

Alpen Capital said Saudi Arabia would lead growth in the GCC as the regional retail market reaches $370 billion over the same period. 

Analysts at Fitch forecast that real household spending in Saudi Arabia is to grow by 2.5 percent this year, a deceleration from the 4.6 percent posted over 2022, as interest rate hikes to curb inflation trickle through to the Saudi economy. 

“Consumer spending growth will return to pre-Covid levels beyond 2023, as the Saudi consumer sector’s moves beyond the base effects post-pandemic and high interest rates dampen spending,” Fitch added.

Inflationary pressures in the kingdom have been evident since 2020 when the government tripled the rate of VAT from 5 percent to 15 percent, which lifted consumer price inflation to an average of 3.5 percent. However, since then, inflation has eased in comparison, even as pressures rise on a global scale.

Latest research from Jadwa Investment said Saudi consumer spending rose in March by 6 percent year-on-year, and by 23 percent month-on-month, with hotels, clothing and food and beverages driving much of the increase.