Curtains Up on Investment
Investment floodgates for GCC firms have been flung wide open after Coca-Cola and Carlyle Group entered the ring, but are family businesses ready to accept it?
April 4, 2012 3:13 by kippreport
As family businesses are the building blocks of GCC econo¬mies, it is a given that foreign investors and global compa¬nies are looking to invest and work in part¬nerships with the regional firms to expand their growth horizons.The globalization was a bit late to reach family-owned businesses in the Gulf region from the investment perspec¬tive, but it seems now that it is in full swing. Foreign investors are more than eager to park their money or buy stakes in Arab family businesses.
In December last year, Coca-Cola bought a stake in Aujan Industries, while Carlyle Group tied up with Alamar Food.
Looking at the first deal, Aujan Industries, one of the largest independent beverage companies in the Middle East, and the Coca-Cola Company signed an agree¬ment for the US firm to acquire half of the equity in Aujan’s existing beverage busi¬ness. The $980 million transaction will provide Saudi Arabia-based Aujan Indus¬tries a platform to accelerate the interna¬tional growth of the Aujan brands, includ¬ing Rani and Barbican, while enhancing the regional outlook for licensed brand Vimto. The transaction will present Coca-Cola a significant equity stake in one of the leading still beverage businesses in the Middle East.
Another deal came through on December 14 when Carlyle Group, the Washington-based private-equity firm that plans to go public next year, bought a 42 percent stake in restaurant opera¬tor Alamar Foods, which operates 185 Domino’s Pizza and Wendy’s restaurants across 11 countries in the Middle East and North Africa.
President of the Eurasia and Africa Group of the Coca-Cola Company, Ah¬met C Bozer, provides an insight into the scenario. “The political awakening (Arab Spring) is unfolding against a backdrop of rapid social and economic transformation. The Middle East and North Africa (MENA) is a rapidly di¬versifying, entrepreneurial, and globally connected business region. It saw five percent annual growth for nearly a dec¬ade before the global recession, and the International Monetary Fund reports that it was growing strongly again – about five percent in 2011.”
The IMF predicted strong four percent growth for the region in 2012 and Gulf Cooperation Council countries could set a torrid seven percent pace. “Over the next decade, the world will add a billion new middle-class consumers in emerging markets, and the MENA region will have 60 million of these new shoppers, said Bozer in his blog.
“Every single country in the Middle East and North Africa saw its population grow by one percent or more in 2011. This is a demographic dividend that, if managed properly, can give the region an advantage for years to come. A rapidly growing population means a strong youth market; new ideas, innovations, and busi¬ness models; entrepreneurship; and even new ideas about governance,” he said.
CEO of Bahrain-based The Family Of¬fice, which manages wealth of high pro¬file families in the region, said that most its clients are from Saudi Arabia, followed by the UAE. Speaking on foreign inves¬tors, Abdulmohsin Omran Al Omran said: “If you look around the world, you will find very few places that are growing at six percent and above, and this region is one of them. And, therefore, whether it is financial institutions like Carlyle and oth¬ers, they would like to come and find op¬portunities because there is growth in the region. They are also showing commit¬ment to the region that helps them trace money for their international funds so there is an interest there. Large corpora¬tions such as Coca-Cola are investing eve¬rywhere, they are just not only selecting the Gulf region but they believe that this growth is going to continue in the region with sizeable young population.”