Retail Investors Flock to subscribe to Modern Mills Company IPO

The Initial Public Offering of Saudi-based Modern Mills Company (MMC) saw strong demand from retail investors with a 22x oversubscription rate, the company said in a disclosure to Saudi Exchange main market Tadawul on Tuesday.

The flour milling company is set to debut a 30% stake on Tadawul with 20 percentage points allocated to institutional investors and the rest to retail investors. MMC has priced the IPO top of the range at $12.8 per share, implying a market capitalisation of the company at $1.04 billion and the total offering size is $314 million.

The institutional book-building process generated an order book of approximately $40 billion and resulted in a subscription coverage of approximately 127x of the total offered shares.

The details of the individual Investor tranche include 966,707 retail subscribers who were offered 2,454,960 shares and every retail investor were allotted a minimum of two shares.

Modern Mills aims to grow its market share by adding new products to its portfolio, venturing into new product categories, and expanding geographically, said CEO Osama Ashi.

It may be recalled that the net income of the company, which operates four mills in Saudi Arabia, with a daily processing capacity of 3,500 tons of wheat and 1,400 tons of animal feed, came down 2.9% y-o-y to $28 million in the first half of 2023, and the revenue declined 2% y-o-y to $120.51 million over the same period. However, its share in wheat flour category volume increased by 24% in 2022, up from 20% in 2021.

HSBC Saudi Arabia is quarterbacking the transaction as financial advisor, joint book-runner, underwriter and lead manager, while Emirates NBD Capital KSA is joint book-runner and underwriter. Al Rajhi Bank and SNB are receiving agents and Moelis & Company Saudi are advisors to selling shareholders.

MMC On Sound Footing

Modern Mills CEO Osama Ashi said that the institutional demand for the company’s shares was driven by a renowned set of local, regional and global institutional investors that they have aspired to attract to our shareholder base and is testament to the soundness of our equity story, best-in-class operational model, strong financial position, and solid growth drivers.

He also said that they will continue to drive growth through strengthening our market share across our three product categories, continued investment in people and technology, expanding our product portfolio, accessing new geographies, and profitably expanding into adjacent categories.

“The success of this stage of the IPO reinforces our role in realising Saudi Arabia’s vision of a self-sufficient, secure future in food production for generations to come and we look forward to matching this success among retail investors,” he added.