Investments at home in Saudi Arabia

The kingdom's best known businessman, and one of the richest men in the world, Prince Al Waleed bin Talal, recently announced plans to make significant investments in his native Saudi Arabia.

At a Riyadh press conference last week Al Waleed pledged SAR10bn ($2.67bn) in the local real estate sector and stock market in a bid to further diversify his already extensive portfolio.

Sometimes referred to as the Warren Buffet of the Arab world, Al Waleed is reputed to be worth approximately $20bn and is frequently listed amongst the top ten wealthiest people in the world. Despite his royal lineage, he claims to have started out with little more than $300,000 in borrowed money.

He has developed a diverse portfolio of interests and a reputation for spotting opportunities to invest in undervalued entities. Perhaps his most significant investment, which netted enormous returns as well as publicity, was his investment in the US banking giant Citigroup. As a percentage over the years, it has fluctuated but appears to account for half of Al Waleed's current estimated wealth.

Other international interests held by Al Waleed include investments in the Four Seasons and Fairmont Hotel chains, Planet Hollywood themed restaurants, Motorola, News Corp, AOL Time Warner, satellite television and other media, schools, hospitals and real estate.

Al Waleed has decided to develop the iconic Kingdom Tower skyscraper in the heart of Riyadh's commercial centre. The move appears to be a public affirmation of his commitment to the kingdom. Similarly, his investments in the medical sector and education, as well as philanthropic activities, seem to indicate Al Waleed is looking to raise his local profile. He has also increased his investment in the Saudi stock market, the Tadawul All-Share Index (TASI) and floated various companies within the Kingdom Holding Company (KHC).

When the region's bourses underwent a major correction this time last year, the TASI was particularly badly hit, finishing the year over 50% down from its peak. Some in Saudi Arabia accused Al Waleed of having precipitated the crash by abruptly selling out of the market. He firmly refuted this saying, "I want to say it bluntly: I had not withdrawn a single riyal from our portfolio in Saudi Arabia last year."

So it was of particular note when KHC announced it will be buying stock of publicly listed companies. The bulk of these are in media, banking, industry and consumer goods manufacturing.

The first SAR5bn ($1.3bn), which is destined for the TASI, will increase Al Waleed's stake in Saudi entities, with two increments of particular note. The investment and consumer goods portion will be directed by the National Industrialisation Company (TASNEE), raising his stake rise above 10% in the company and his involvement in Samba Financial Group will increase to around 5%.

Al Waleed is also raising his stake in the consumer goods company Savola to around 13% and the Saudi Research and Marketing Group (SRMG), which is primarily owned by Prince Ahmed ibn Salman ibn Abdulaziz, to over 25%. A stake in SRMG will add significantly to Al Waleed's media interests - he already owns the Rotana music channels and has stakes in News Corp and AOL Time Warner - and will broaden his involvement in the sector to print media and publishing in the kingdom.

SRMG is the holding firm of Saudi Research and Publishing Company, which owns various related companies, including the London-based international Arabic daily A-Sharq Al-Awsat. Al Waleed also indicated interest in entering the newly liberalised insurance sector by buying a stake in Medgulf. However, he did not elaborate further on this investment.

He explained that the remaining SAR5bn ($1.3bn) allotted for the real estate sector will be invested in major developments in both Riyadh and Jeddah. He explained that both "projects will be the largest ever real estate projects to be launched and will constitute a significant part of the local real estate market".

The Riyadh project will be a fully integrated living area with residential units and commercial areas, as well as a Fairmont operated leisure resort. It is set to house some 69,000 residents. The cost of completion is expected to be SAR25bn ($7bn).

In Jeddah, where land has also already been acquired, KHC will be developing a 5.3m square metre mixed-use complex featuring a skyscraper at its centre. Al Waleed estimated the cost on completion would be in the region of SAR50bn ($13.3bn).

(C) Oxford Business Group - www.oxfordbusinessgroup.com

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