U.S. private equity firm KKR and Saudi dairy company Almarai are among four rival groups shortlisted to bid for a majority stake in Abu Dhabi-based National Food Products Company, sources said, highlighting the appeal of the Gulf food and dairy sector.
With young, fast-growing populations and evolving culinary tastes, Gulf countries are seen as big potential growth markets for food. Global milk prices are also low, making dairy a target for deals, and KKR has made successful investments in dairy in China in recent years.
NFPC, one of the largest food and dairy manufacturers in the United Arab Emirates, whose brands include Milco, Lacnor and Oasis bottled water, appointed Emirates Investment Bank in October to arrange the sale, aimed at raising up to $1.5 billion.
For its bid, KKR is teaming up with Dubai-based Fajr Capital, which mainly pools sovereign funds to invest in Muslim countries.
Fajr announced this week it had completed the purchase of restaurant franchise company Cravia, which operates Cinnabon and Five Guys hamburger restaurants in the Gulf.
KKR and Fajr teamed up last year to bid for fashion retailer Azadea Group, which has stores for brands like the Gap and Intimissimi in the Middle East, although that deal has stalled. KKR was also part of a 2014 bid for Americana, operator of Middle East franchises for Pizza Hut and KFC restaurants.
The other bidders for NFPC include an international financial firm and an international industrial firm, the sources familiar with the shortlist said, without naming them.
NFPC and Fajr Capital declined to comment. KKR did not immediately respond to a request to comment.
Private equity bidders would face a strong rival in Almarai, 2280.SE the Gulf’s largest dairy company, which said in April that it was interested in buying a controlling stake in NFPC and had already been invited to conduct due diligence.
NFPC, which also has a joint venture with Danish dairy giant Arla Foods [ARLAF.UL], was founded by Lebanese-born businessman Fady Antonios and the local Bin Hamoodah group.
Antonios is looking to raise funds for the company’s expansion and reduce his own stake in preparation for his eventual retirement, sources familiar with the matter have said.
NFPC has already started work on the first phase of a $400 million development of a production complex in Abu Dhabi’s Khalifa Industrial Zone.
Almarai’s potential acquisition in NFPC would help the Saudi company gain a strong foothold in the UAE, “where they are weaker versus peers”, and boost their distribution into other Gulf countries such as Oman, Muhammad Faisal Potrik, head of research at Saudi Arabia’s Riyad Capital, said in an email.
He said a rival dairy and juice company would be a better fit for NFPC than private equity firms like KKR, because of prior sector expertise and potential economies of scale.
“Private equity would need to bring in experienced management to run operations, something which existing operators already have,” Potrik said.
By Hadeel Al Sayegh and David French
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