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UAE retailer Lulu to launch IPO next week, sell 25% stake

Lulu Retail Holding will be listed on the Abu Dhabi Securities Exchange; the listing is expected on November 14, 2024

Published: Mon 21 Oct 2024, 6:00 AM

Updated: Mon 21 Oct 2024, 7:42 PM

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UAE's retail giant Lulu Group on Monday announced that it would sell 25 per cent shares through an initial public offering (IPO) with a nominal value of Dh0.051 each.

According to a prospectus published in Khaleej Times on Monday, the company will sell over 2.582 billion (2,582,226,338) shares through a three-tranche IPO which will commence on October 28 and close on November 5.

Lulu Retail Holding will be listed on the Abu Dhabi Securities Exchange. The listing is expected on November 14, 2024. The offer price range will be announced on the same day or before the opening of the offering on October 28.

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Joint lead receiving banks are Abu Dhabi Commercial Bank and First Abu Dhabi. Joint lead managers are Abu Dhabi Commercial Bank, Emirates NBD Capital, First Abu Dhabi Bank, HSBC Bank Middle East and EFG Hermes UAE. The receiving banks are First Abu Dhabi Bank, Dubai Islamic Bank, Emirates Islamic Bank, Abu Dhabi Commercial Bank, Mashreq and Emirates NBD.

The UAE has seen a host of IPOs from public and private sector entities over the past couple of years including Dubai Taxi Corporation, Salik, Al Ansari Exchange, Pure Health, Investcorp Capital, Phoenix Group, Adnoc entities and many others.

The previous IPOs witnessed exceptionally strong demand from retail and institutional investors. Analysts are confident that Lulu’s share sale will also see an overwhelming response from the investors next week.

Lulu Group is one of the largest retailers in the UAE and GCC region, employing over 50,000 workers. Investors have been waiting for the retail giant’s IPO to own a stake in the retail major.

ADQ had bought a 20 per cent stake in the company for $1 billion in 2020, which helped the retailer to expand to new markets.

Under the first tranche for individual subscribers and eligible employees, 258.222 million shares will be up for subscription, representing 10 per cent of the offer share. Each subscriber – other than eligible employees – will have a minimum guaranteed allocation of 1,000 shares and each eligible employee will have a minimum guaranteed allocation of 2,000 shares.

The minimum application size for first tranche subscribers is Dh5,000 with any additional application to be made in increments of Dh1,000. There is no maximum application size for this tranche.

Under the second tranche for institutional investors, Lulu Retail aims to offload 2,298,181,441 shares, representing 89 per cent of the off share.

The minimum application size for the second tranche subscribers is Dh5 million. There is no maximum application size in this Tranche.

Over 25.822 million shares will be sold through the third tranche for senior executives, representing one per cent of the offer share. The minimum application size for third tranche Subscribers is Dh50,000 with any additional application to be made in increments of Dh1,000. There is no maximum application size for subscribers in this tranche also.

The selling shareholders reserve the right to amend the public subscription, according to the prospectus.

The selling shareholders will have a lock-up period of 180 days after the listing on the Abu Dhabi Securities Exchange.

Lulu Group is the largest full-line retailer with stores in all GCC countries by selling space, sales and number of stores in 2023. The Group was the second-largest grocery retailer in UAE and largest in Oman, Qatar, Bahrain, and Kuwait and the fastest-growing and largest pan-GCC retailer in Saudi Arabia, according to market consultants. It currently has a strong omni-channel presence in the form of 3 formats – hypermarkets, express stores and mini-markets.

By August 2024, the group operated 240 stores, comprising 116 hypermarkets, 102 express stores and 22 mini markets with 103 stores located in the UAE, 56 in Saudi Arabia and 81 across other markets.

The group’s total selling space as of December 31, 2023, was approximately 1.3 million square metres, which was around 3 times higher than the average selling space of its listed peers in the GCC. The retailer, on average, served over 600,000 daily shoppers every day in 2023. Sourcing products from 85 countries, it operates a network of 21 distribution centres in the GCC to support its retail operations.

Lulu joins other grocery firms that have listed, such as UAE-based Spinneys this year, and Saudi grocery retailer BinDawood Holding in 2020.

Dividend policy

The company plans a total dividend pay-out ratio of 75 per cent of annual distributable profits after tax, paid semi-annually. It plans to pay a dividend for the six months ending on December 31 in the first half of 2025.

The company posted $7.27 billion (Dh26.7 billion) revenues in 2023, up from $6.89 billion in the previous year.

Yusuffali MA, founder, chairman and non-Executive director of Lulu Retail, said the firm, which was founded in 1974, has exceeded its own expectations as it operates more than 240 stores across six GCC countries.

“Integral to our growth is the vision and ambition of the UAE, KSA and other GCC nations where strong national leadership is enabling positive demographic and consumption trends and driving impressive economic growth. We’re looking forward to welcoming new shareholders to Lulu and are sure they will share our passion for the company and excitement for the future,” he said.

“Lulu is a brand synonymous with retail in the GCC and we’re incredibly proud to announce the launch our IPO today. Over the past 50 years, we have grown from one store in Abu Dhabi to the largest pan-GCC retailer by market share and the fastest-growing player of scale in Saudi Arabia. Every day, Lulu serves more than 600,000 shoppers, enabled by our unmatched international sourcing network across 85 countries, ensuring we are deeply rooted in all GCC markets and able to offer over 200,000 active SKUs, catering to all our customers’ diverse needs," he added.

“Our scale is combined with a track record of delivering robust revenue growth, attractive profit margins and a well-defined growth strategy built around enhancing and delivering greater value from our existing stores, expanding our store network, delivering operational efficiencies and growing our high-value private label and loyalty programs", said Saifee Rupawala, CEO of Lulu Retail.

"With GCC retail presenting a $100 billion market opportunity over the next five years and our business in Saudi Arabia primed for further growth, we are confident that Lulu will continue to be where the world comes to shop”, he added.

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