March 25, 2023

Dubai Week

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These factors prompted Al-Shaya to sell shares in the jewelry of its investments

These factors prompted Al-Shaya to sell shares in the jewelry of its investments

The Kuwaiti people remember well the famous video that appeared to John Hayden, the CEO of the Alshaya Group at the beginning of the Corona crisis. %

The CEO at the time said: “In March 2020, governments announced that they would close their markets due to the Corona, with less than 5% of our stores open today, and 95% of our revenue while we were there. Bear the same costs. “

The video, which was circulating in Kuwait at the time, was the first sign of the Al Qaeda’s al – Shaya group, one of Kuwait’s oldest family groups, having been hit hard, especially after news broke that about 15,000 workers had been laid off. Has been integrated for over a century.

But Corona has shown no mercy on itself, nor on retail and real estate companies. The parent company “Al-Mafaniya” has dropped more than 60% by 2020, and its profits have returned to the level of 2014, and the retail business includes leading brands such as Starbucks, H&M, The Body Shop and Cheesecake Factory. .

But the gem of all these brands is Starbucks, which is less vulnerable to the Corona crisis due to the brand’s strength and demand for it. So al-Arabiya’s sources say the group’s winning horse sold it and saved what could be saved from Corona’s damage, and the al-Shaya group began looking for buyers.

In November last year, Bloomberg announced that the Alshay Group had appointed JPMorgan to look for potential buyers for a minority stake in Starbucks. Out.

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“JPMorgan” will be absent for three months, then another leaked news was released yesterday by “Bloomberg”. Gulf Investment Funds These are the Abu Dhabi Government’s Mubatala and the Abu Dhabi Development Holding Funds and the Saudi Public Investment Fund. Two more private investment firms, CVC Capital Partners and Brookfield, are interested in buying.

Assessment problem

But there is a problem with the estimate. Al-Shaya puts the $ 11 billion “exaggerated” estimate at $ 15 billion, compared to the $ 11 billion estimate for interested parties. In addition, the Alshaya group intends to sell one-third of its stake in Starbucks Alshaya and retain a controlling stake.

Al-Shaya’s “exaggerated” rating by Kuwaiti bankers to Al Arabia explains that the group wants nearly $ 5 billion in cash, which is the largest cash flow, and requires sovereign funds in “cash” and private investment firms that specialize in valuation. It will not be easy for the Alshaya Group to obtain additional loans to finance its needs and expansion.

Family problems

In fact, most Kuwaiti family businesses are experiencing cash and management crises, and the Alshaya Group is very successful in management, and because of its retail operations with more than 70 brands, it has a steady cash flow. But the Corona crisis surprised the group, and its successful model turned out to be a “problem”.

Prior to Corona, the Alshaya Group model was based on two things: Launched in 1999 by acquiring global Starbucks ownership, in which the company expanded to 14 markets and achieved great success. Second, Avenues, which opened in 2007, began with the idea of ​​building an evening, growing into a large integrated market that showcases brands of the same group, while controlling the store rental that investors want to showcase their products. shopping complex.

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Feet to the sample

Analysts believe that because of this model, the Alshaya Group has been slow to transform its online business because this change is actually affecting its traditional business. And when it came to Corona, 95% of the group’s stores were closed, leaving the group in dire straits as a retailer on the one hand and real estate on the other. About 60,000 employees, in addition to rent and expenses.

The team quickly moved to lay off employees to cut costs, now employing between 45,000 and 50,000 employees. But as consumer habits changed after Corona, it became entangled in approximately 4,000 stores, making online demand the primary buying trend, and many of the competitors’ names for the group’s brands emerged, some of which were closed.

Starbucks was the only survivor of the closure because the group has about 1,750 stores in all its markets, but its demand continues to grow. Discounts.