(Bloomberg) — When LeMall opened amid a blaze of fireworks in 2010, it marked the inauguration of the biggest shopping mall in southern Lebanon. To the region’s fashionable young residents, it signaled something even more important: the first local Zara outlet.
“Zara offers a wider range of clothing that can’t be found anywhere else,” Fatima Hussein-Shour, an interior design student, said in a telephone interview from her university’s campus in the port city of Sidon, where LeMall is located. “Its styles are definitely more unique than those offered at local stores I used to shop at.”
Hussein-Shour, a 19-year-old who wears a hijab and favors floral prints, is one of thousands of shoppers across the Middle East whose embrace of Inditex SA’s trendy, cost-conscious brand has helped create a billion-dollar fortune for the company’s regional franchisee, the Daher family. Through their Beirut- based company, Azadea Group, three Daher brothers own franchise rights to more than 55 fashion and lifestyle brands in 14 countries.
Alongside Zara, the Spanish chain created by the world’s 4th-richest person, Amancio Ortega, Azadea’s stable of licensed brands includes fashion retailers Max Mara, Sunglass Hut and French bakery Paul. While the company operates stores as far afield as Ghana and Kazakhstan, most of its 550 outlets are located in the mega-malls of the United Arab Emirates.
“When it comes to the Middle East, the U.A.E. has long been the vanguard of international retailers’ expansion strategies,” said Mat Green, head of research at CBRE Middle East in Dubai. The sheer amount of retail space — one square meter for every one of its 2.3 million residents — coupled with extreme weather have made malls “places to be, not just shop,” he said.
Private equity firms KKR & Co. and Dubai-based Fajr Capital Ltd. are jointly bidding for a 25 percent stake in Azadea in a deal that could value the company at as much as $1.6 billion, people familiar with the matter said in November.
Azadea’s selling shareholders are three brothers from Lebanon. The oldest, Wassim Daher, founded the company in 1978 as a single multibrand clothing store in Beirut. His brother Hassan is managing director and the youngest sibling, Said, serves as chief executive.
The brothers share a fortune of at least $1.4 billion, according to the Bloomberg Billionaires Index.
Wassim Daher owns the most shares, while Said and Hassan own the rest, according to Suzanne Menassa, Daher’s executive assistant. Two other Daher brothers, Mohammed and Hussein, don’t own any shares, she said in an e-mail. She declined to comment on the company’s valuation.
The Dahers expanded the company, originally called D Group, to Dubai in 1990. Eight years later, the family acquired the franchise rights for Inditex brands Zara and Massimo Dutti for most of the Middle East, according to a 2005 interview Said Daher gave to Beirut-based Executive Magazine.
Daher said in the article that the nimbler franchise model was key to Azadea’s quick growth.
“You can grow much faster as a franchise than if you’re operating your own brand. With a franchise, you’re implementing already-successful business models,” he said. “Why bother establishing a vertically-integrated business model which will take you years and years to perfect when you can get involved at the end of the supply chain and start opening outlets in promising markets in a matter of months?”
For retailers seeking a wide swath of consumers, Dubai is a promising market, according to Nicholas Maclean, managing director at CBRE Middle East.
“Retailers in the midrange, like Zara, see a very aspirational component to the people living here,” he said. “The salaries of the people here are very broad and so is the range of nationalities. The demographics are extraordinary.”
Dubai is second only to London in terms of the number of international retail brands that are present, according to a CBRE report. Retailers see it as a safe haven in an affluent, if unstable, region with abundant modern, well-trafficked malls, said Maclean.
“Sports and beaches are part of Dubai’s draw, yes, but the key is inside the shopping malls,” he said.
A former senior executive at Azadea said that the U.A.E. was the company’s most profitable region. Its aggressive investment attitude and diversification across brands, countries and business lines — which include multimedia and furniture outlets, restaurants and real estate — supported the rapid growth, he said, asking not to be identified because the information is private.
The Daher brothers’ regional aspirations haven’t diminished their commitment to their home country, Lebanon. They engage in local projects through the Azadea Foundation, a non-governmental organization financed by the group’s board members and employees.
The nonprofit, which focuses on environmental issues in the politically volatile country of more than 4.5 million people, is credited with the restoration of the 107-year-old Rene Moawad, or Sanayeh Garden, one of Beirut’s only public spaces.
While the U.A.E. is home to the world’s largest mall, style-conscious Lebanese shoppers remain crucial to Azadea’s business. Lebanon is tied with the U.A.E. in having the highest concentration of Zara outlets in the region.
“I have no idea where I’d shop if Zara ever closed down in Sidon,” Hussein-Shour, the Lebanese interior design student, said. “I spend most of my monthly allowance here.”