UAE's Agthia Group's Growth through Acquisitions
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Case Code: BSTR555 Case Length: 16 Pages Period: 1978-2018 Pub Date: 2019 Teaching Note: Available |
Price: Rs.300 Organization: Agthia Group PJSC Industry: Food and Beverages (F & B) industry Countries: United Arab Emirates, Egypt Themes: Growth Strategy, M&A, Organizational Design |
Abstract Case Intro 1 Case Intro 2 Excerpts
Excerpts
IPO
In 2004, the company went in for its first Initial Public Offer (IPO) on the Abu Dhabi Securities Exchange (ADX) . At that time, the name of the company was changed from 'Grand Mills' to 'Emirates Foodstuff and Mineral Water Company' or Agthia Group PJSC.
Post the IPO, 56% of the 600,000 shares in Agthia were held by the UAE government, through Senaat General Holding Corporation (51%) and Abu Dhabi Retirement Pensions & Benefits Fund (5%). The balance of the share capital was held by various institutional and individual investors. (See Exhibit II for Share Capital of Agthia). ...
Inorganic and Organic Growth Strategy
Over the years, Agthia expanded its business through numerous acquisitions and partnership agreements, apart from several greenfield expansions.
In 2007, Agthia signed a Memorandum of Understanding (MOU) to acquire Ice Crystal Mineral Water Company (Ice Crystal), a manufacturer and distributor of 5-gallon water bottles across the UAE. The deal was negotiated through Agthia's subsidiary, Al Ain. Through the deal, Al Ain took over the management and distribution rights of Ice Crystal's products across the UAE and eventually to the rest of the world (ROW). The acquisition helped position Al Ain as a premier bottled water supplier in the UAE. ...
Business Restructuring
Post its various acquisitions and its product portfolio expansion, Agthia reviewed its strategies in 2015. The review made the company more ambitious pertaining to its revenue maximization objective. Agthia aimed to become a US$ 1 billion company by 2020 and also the leading F & B company in the Middle East...
Business Performance
In FY 2017, Agthia's CBD (W & B and Food) recorded revenues worth AED 915 million, an increase of 25% compared to 2016. However, the ABD (flour, mills, and animal feed) registered revenue of AED 959 million, which was 13% lower than in 2016. The reduction in revenues was mainly due to withdrawal of Government subsidies...
Challenges
In spite of the positive business environment, the sales volume of the F&B industry in the UAE had seen a decline in the previous few years. Almost two-thirds of the small scale F&B operators had had to shut down their businesses between 2016 and 2017. The other challenges faced by the F&B operators were surge in rents, staff turnover, and difficulties in arranging better ambience for new outlets amid rising prices and offering quality food to price-sensitive customers. As an impact, a reduction in demand was expected for the products from the F&B companies in the long run...
Road Ahead
GCC's F&B market expanded at a Compounded Annual Growth Rate (CAGR) of 10% from 2010 to 2015 to reach a market size of US$ 21.9 billion. In the future, the growth in the sector was expected to be propelled by events such as the Expo 2020 Dubai and FIFA World Cup 2022, making the GCC's F&B market the preferred investment cluster in the future. The UAE had over 16,000 F&B outlets and the number was expected to increase to over 19,000 by 2020...
Exhibits
Exhibit I: Revenues and Net Profits of Agthia for Five Years from 2012-2017
Exhibit II: Shareholding Pattern of Agthia for Year Ended 2017
Exhibit III: Segments of Agthia, As of 2018
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