Strategy Note /
Global

Dur-Taiba Merger to create one of the largest hospitality entities in Saudi

  • Dur and Taiba signed an MOU to recommence discussion on a possible merger of the two entities.

  • Dur has 30 hotels across Saudi with a total of c5,170 rooms.

  • Taiba has embarked on an expansion strategy, which is expected to add 1,490 rooms by 2026f.

SNB Capital
20 December 2022
Published bySNB Capital

Dur and Taiba signed an MOU to recommence discussion on a possible merger of the two entities. The proposed transaction would be implemented through a share exchange offer made by Taiba to Dur’s shareholders for the purposes of acquiring all of Dur’s issued shares. Dur has 30 hotels across Saudi with c5,170 rooms while Taiba has 7 hotels and c2,150 rooms located in Madinah. We believe Taiba can benefit from Dur’s network and hotel management expertise while Dur can capitalize on Taiba’s strong balance sheet and presence in Madinah.

Key Points

  • Dur has 30 hotels across Saudi with a total of c5,170 rooms, with 44% of their properties located in Riyadh, 33% in Jeddah and 17% in Makkah.

  • Taiba has embarked on an expansion strategy, which is expected to add 1,490 rooms by 2026f to a total of 3,300 rooms. Although Madinah will remain the main focus, Taiba is diversifying its offering by expanding in Riyadh and Jeddah (500+ rooms). This ambitious expansion plan further emphasizes the need for a strong partnership for Taiba.

  • We believe that the merger is positive for both companies. In addition to the typical cost synergy that usually arises from such mergers, we believe Taiba can benefit from Dur’s well diversified presence across Saudi and its hotel management expertise, while Dur can benefit from Taiba’s robust balance sheet and strong presence in Madinah.

  • Based on 2019 earnings (normalized pre-COVID year), the pro-forma top-line is cSAR941mn with a net income of cSAR224mn (net margin of 23.8%). Total combined assets stand at SAR7.5bn as of 9M 22, while liabilities stand at SAR2.2bn. We note that Taiba has an investment portfolio of cSAR1.1bn with a long term debt of SAR100mn while Dur’s total debt stands at cSAR1.1bn. Taiba’s market cap stands at SAR4.1bn, while Dur’s market cap stands at SAR2.0bn.