Abraaj has emerged as the frontrunner to buy a majority stake in Al Raya for Foodstuff Co after entering into exclusive talks with the two private equity firms that currently control the Saudi supermarket chain, sources familiar with the matter said.
The emerging markets-focused investor has edged in front of Apollo Global Management, which had submitted a bid that it hoped would lead to its first transaction in the Middle East.
Abraaj’s period of exclusivity runs until Dec. 31, and while all parties are hoping to conclude a deal by that date, negotiations could continue beyond then, according to two of the sources.
Sources had previously said the deal could be worth as much as $300 million.
Levant Capital and New York-based The Rohatyn Group (TRG) declined to comment. Abraaj also declined to comment. A spokesman for Apollo didn’t immediately respond to a request for comment.
The sale of the stake in Al Raya, which traditionally operates supermarkets in the southern and western regions of the kingdom, is another example of the interest being shown by institutional investors in Saudi Arabia.
They are especially drawn to assets that can tap in to the kingdom’s young and increasingly-wealthy population, meaning food and beverage and retail firms are high on the list.
Both Gulf Capital and Fajr Capital, two major Middle Eastern private equity firms, were also interested in the Al Raya stake but following the submission of second-round bids in September, it came down to a shoot-out between Abraaj and Apollo, according to several sources.
While Apollo offered a higher bid for the stake, Dubai-based Abraaj had the track record of successfully executing transactions in the Middle East, these sources said.
Apollo entered the Middle East earlier this year through a joint venture with local firm Frontier Management. Under the arrangement, Frontier Management sources deals for the New York-based firm, which then decides whether to invest.
Levant Capital and Citi Venture Capital International, an emerging market-focused investment firm which was acquired by TRG in 2013, bought the stake in Al Raya in 2012 for $100 million.