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PIF eyes $400m investment in Saudi travel giant Almosafer

King Fahd fountain, Jeddah visitsaudi.com
King Fahd fountain in Jeddah. Domestic and international travel to the kingdom is rising sharply
  • Public Investment Fund could acquire 30 percent stake
  • Term sheet values Almosafer at SR3.7 billion, or $986 million
  • Tourism group has reported record growth in second quarter

Saudi travel giant Seera Group Holding announced the signing of a non-binding term sheet with the Public Investment Fund on Tuesday, for a possible investment in one of its subsidiaries.

The term sheet, cited in a filing on the Saudi Tadawul, proposes an investment by the PIF – the kingdom’s $620 billion sovereign wealth fund – in Almosafer Travel and Tourism Company, which recorded the highest levels of consumer travel bookings in its history in June.

According to the filing, PIF is seeking a 30 percent shareholding in Almosafer for a total consideration of up to SR1.5 billion ($400 million) to be paid to the travel company for new shares.

The investment amount is based on a preliminary pre-money enterprise value of Almosafer and its subsidiaries of SR3.7 billion. 

Any deal would include a SR386 million earn-out amount conditional on Almosafer achieving certain pre-agreed key performance indicators in 2023 and 2024. 

As part of the reorganisation, Seera’s destination management company, Discover Saudi, and its Hajj and Umrah business-to-business operator Mawasim, would fall under the umbrella of Almosafer. 

Seera said the signing of the term sheet was a “strategic milestone” in its transformation plan, unveiled in 2017, to strengthen the group’s businesses and enhance long-term value for shareholders.

If the deal goes ahead, Almosafer aims to use the capital to scale its inbound, outbound, religious and domestic tourism operations. It said it would also “strengthen its credentials as a national champion of travel and tourism services in Saudi Arabia”.

The transaction is subject to obtaining regulatory and any other approvals as may be required by the parties, the filing added.

Extra capacity needed for international tourists

Rabia Yasmeen, senior research consultant at Euromonitor International, told AGBI: “For Saudi Arabia’s Public Investment Fund, tourism is not only a sector to unlock economic growth, but also a springboard to connect with the global audience. 

“With the number of new tourism offerings, ranging from cultural experiences at Al Ula to sports and entertainment, the country aims to unlock a new stream of international tourists.

“This also increases the need for additional capacity to host them.”

Seera Group reported strong growth in demand for services across inbound, outbound and domestic tourism during the second quarter of 2022.

Its gross booking value rose to SR2.5 billion in Q2, an increase of 108 percent compared to Q2 2021. During the first six months of 2022, Seera’s GBV was SR4.1 billion, an increase of 105 percent compared to the same period in 2021.

Almosafer reported a 89 percent growth in GBV to SR1.7 billion in Q2. Its consumer travel division achieved its highest quarterly GBV of SR1.1 billion, an increase of 175 percent compared to Q2 2021. 

In June, Almosafer’s GBV was over SR500 million, exceeding pre-pandemic levels by 27 percent to record the highest levels of consumer travel bookings in its history. Almosafer’s consumer travel segment is on track to achieve SR4 billion GBV by the end of 2022.

The company said its results reflected strong demand for both international and domestic travel, with bookings for London and Paris this summer exceeding the pre-pandemic levels in 2019.

This was driven by the introduction of the electronic visa waiver for Saudi nationals in the UK and the lifting of pandemic restrictions in France.

Almosafer Business, the group’s corporate and government travel management unit, reported a 27 percent growth in GBV to SR600 million in Q2.

Architecture, Building, Mecca
Muslims pray at the Grand Mosque during Hajj on August 8, 2019. Seera’s Hajj and Umrah operator Mawasim will come under the Almosafer umbrella if the PIF deal goes ahead. Picture: Reuters/Waleed Ali

Majed Alnefaie, CEO at Seera Group, said: “We reported a very positive summer booking season and the demand for travel remains strong led by the Saudi leadership’s focus on promoting the tourism sector as a key contributor to the economy.”

The kingdom has set a target for tourism to contribute 10 percent of GDP by 2030. It ranked 33rd out of 117 countries in the World Economic Forum’s annual Travel & Tourism Development Index, published in May.

Yasmeen said: “Saudi Arabia has traditionally been a leading religious destination for Muslim tourists and pilgrims. 

“However, as the country opens up and embraces social reforms, it is attracting interest from tourists globally. They are particularly intrigued to experience Saudi culture and understand its heritage.”

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