Middle East Paper Co (MEPCO), one of the largest makers of paperboard in the Middle East, will sell six million shares to retail investors at SAR 30 a share through a book-building process, making it the first initial public offering in the Saudi market this year.
The IPO begins today and lasts until April 14.
The Saudi Capital Market Authority (CMA) has already approved MEPCO’s to sell 30 percent of the company’s capital, or 15 million shares. Up to 60 percent of the offered shares were allocated to institutional investors and funds, which was completed last week and was 1.035 percent oversubscribed.
Last year six initial public offerings took place in the Saudi market.
Company background:
The Jeddah-based company was founded in 2000 by Al-Muhaidib & Sons and Al-Muhaidib Holding Co. Its capital was increased six times from SAR 15 million to SAR 500 million, or 50 million shares.
The company has one factory in Jeddah with three production lines that produce 270,000 tons of paper a year.
The products include high performance test liner, and semi-chemical fluting used in making packaging materials. Both products are exported across the Middle East.
In 2013, the company started upgrading its production lines to increase production and improve water and energy utilities. The upgrade will be completed in the first half of this year and the first quarter next year.
The total annual production capacity is expected to increase from 420,000 tons to 440,000 tons in 2016 and 465,000 tons in 2017.
Affiliate companies:
Waste Collection & Recycling Co (WASCO)
The Jeddah-based affiliate is 97 percent-owned by MEPCO. Its main activity is focused around retail and whole sale of recycled material throughout its 19 recycling centers across the kingdom. MEPCO reuses the recycled products manufactured in its affiliate, which keeps its production cost low.
Risk factors:
Volatile raw material prices— The company said that its revenue and profit are largely dependent on the prices of raw material and recycled papers provided by its affiliate, WASCO. The prices and profit are subject to market rules, supply and demand.
Energy:
In 2012, the company signed an agreement with Saudi Arabian Oil Co. ARAMCO to provide fuel at local market price, which is lower than the international market price, provided that the company nationalizes 50 percent of its staff.
The company has, thus far, nationalized 48.54 percent of its workforce, which might affect its contract with ARAMCO as the company may temporarily stop production.
Customers:
Up to 65 percent of the company’s output is sold to 10 major clients. If any of those clients dropped out, it would negatively affect its profit, stock performance and financial position.
Some of the contractors that supply raw material to WASCO can unilaterally end the contracts. This could force the company to reduce its production or buy supplies from other contractors at higher prices, which will be reflected in its profit margin and competitiveness.
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Company Profile |
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Middle East Paper Company (Mepco) |
Company |
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Saudi Stock Exchange (Tadawul) |
Stock market |
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Manufacturing paperboard |
Core business |
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Active |
Status |
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SAR 500 mln |
Capital |
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IPO Details |
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30% |
IPO percentage |
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6 mln |
Number of shares |
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SAR 30 |
Issuance price |
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SAR 180 mln |
Issuance volume |
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Saudi citizens |
Subscribers |
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10 shares |
IPO minimum |
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250 thousand shares |
IPO maximum |
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April 8-14, 2015 |
IPO date |
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April 21, 2015 |
Allocation |
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April 21, 2015 |
Surplus payment |
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Riyad Capital |
Lead manager and underwriter |
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SAMBA, Al-Rajhi, NCB, RIBL, ANB, SABB |
Receiving banks |
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Riyad Capital |
Financial advisor |
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Abdulqader Al-Muhaidib & Sons Company and Lafana Holding Group hold the highest number of shares in MEPCO, with 11.62 million shares each.
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Mepco Main Shareholders (after IPO) |
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Percentage |
Number of shares (mln) |
Main shareholders |
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23.2% |
11.62 |
Abdulqader Al-Muhaidib & Sons Company |
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23.2% |
11.62 |
Lafana Holding Group (Abunayyan Holding) |
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13.6% |
6.81 |
Abdullah Abdulrahman Al-Muammar |
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5.0% |
2.48 |
Emad Abdulqader Al-Muhaideb |
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5.0% |
2.48 |
Abdulelah Abdullah Abunayyan |
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30.0% |
15.00 |
Public |
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100% |
50.00 |
Total |
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