Saudi Arabia’s sovereign wealth fund, the Public Investment Fund (PIF) has agreed to acquire a 50 percent stake in Adeptio Holdings from billionaire Mohamed Alabbar for an undisclosed sum. The deal comes on the heels of Adeptio acquiring a controlling stake in Gulf food giant, Americana from the Kharafi family of Kuwait for US$2.35 billion.
Founded in 1964, Americana owns the Middle East franchises for many popular Western food brands including KFC, Pizza Hut, and Krispy Kreme. The company also produces a wide reaching portfolio of regionally marketed branded foods, including California Garden beans and Farm Frites frozen vegetables, which help earn the group a total market value of approximately $2.5 billion, according to data from Thomson Retuers.
The rare move into the food investment space is a part of a strategic shift adopted by PIF when management was transferred from the Ministry of Finance to the Council of Economic and Development Affairs in 2015. Since the shift, the the fund has been focused on diversifying its investments beyond oil-centric sectors to create a portfolio that reflects a broader geographic and asset class reach.
Following the close of the deal, Adeptio states that it will issue a mandatory tender offer for the remaining shares in Americana being held by public shareholders.
As oil prices remain low, Saudi Arabia has reduced spending and has drawn on foreign reserves that have fallen by $200 billion since August of last year in order to meet its budget deficit that amounted to 15 percent of its gross domestic product last year, according to Bloomberg.
These factors have prompted the Saudi government to transfer 100 billion riyal (US$27 billion) to the PIF this week, increasing its assets by 17 percent and boosting its war chest as the kingdom aims for the PIF to grow to be the largest sovereign wealth fund in the world.
“The government is aggressively pursuing its investment diversification plan,” John Sfakianakis, director of economic research at the Gulf Research Center, told Bloomberg. “It also sends a powerful message that the local economy is seen as a tremendous opportunity and will boost private sector confidence after a series of government spending cuts.”
Moving forward the PIF will be pursuing investment opportunities that “support private sector investments and promote economic growth and local contents” as it works to lift the ratio of foreign investment in its portfolio from five percent to 50 percent by 2020.
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Lynda Kiernan
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