The Public Investment Fund or PIF of Saudi Arabia will complete the acquisition of the Saudi Iron & Steel Company (Hadeed) from the Saudi Basic Industries Corporation (Sabic) in a deal worth 12.5B Saudi riyals ($3.3B).
This move aims to accelerate the kingdom’s industrial development, according to The National News.
Sabic, the largest petrochemical company in the Middle East, stated in a filing to the Tadawul stock exchange that the transaction is anticipated to be finalized before the conclusion of the first quarter in 2024.
In a reciprocal share exchange deal, Hadeed will acquire full ownership of Al Rajhi Steel Industries Company (Rajhi Steel) from Mohammed Abdulaziz Al Rajhi & Sons Investment Company (Rajhi Invest) in exchange for newly issued Hadeed shares, as confirmed by the Public Investment Fund (PIF).
“These transactions will bring together PIF’s financial capabilities and industry experience with Hadeed and Rajhi Steel’s leading technical and commercial expertise, to create a national champion in Saudi Arabia’s steel sector,” Yazeed Al Humied, deputy governor and head of Middle East and North Africa Investments at PIF, said.
In alignment with the broader objectives of the Public Investment Fund (PIF), these agreements are part of the PIF’s efforts to advance the local industrial sector and establish strategic partnerships that enhance the private sector’s economic contribution.
As stated in the announcement, these deals will help meet the rising domestic demand for steel and enhance Saudi Arabia’s steel production capabilities.
Additionally, they will contribute to the growth of downstream industries, including local construction, automotive, utilities, renewables, transport, and logistics.
Vision 2030 Drives Expansion of Industrial and Mining Sectors
Saudi Arabia, the largest economy in the Arab world, is expanding its industrial, manufacturing, and mining sectors in line with its Vision 2030 strategy, aimed at reducing its dependence on oil revenue and diversifying the economy.
Back in May, Saudi Aramco, the world’s leading oil producer, along with the PIF and China’s Baoshan Iron and Steel, inked an agreement to construct the kingdom’s inaugural steel plate manufacturing complex.
Last year, the nation unveiled plans to construct three iron and steel projects valued at 35 billion riyals, with a total production capacity of 6.2 million tonnes, in alignment with Vision 2030.
Sabic stated in its stock exchange announcement that it would direct the proceeds from the sale of Hadeed towards strengthening its presence in the chemicals sector.
This agreement will enable Sabic to streamline its portfolio and concentrate on its primary business, it stated.
The fair assessment of Hadeed’s net assets is anticipated to result in a non-cash loss of 2 billion to 2.5 billion riyals in Sabic’s third-quarter financials.
“We realise that Hadeed has further potential to become one of the most significant iron and steel companies in the GCC region,” Abdulrahman Al Fageeh, chief executive of Sabic, said.
“For Sabic, it was therefore important that the right buyers be found to enable Hadeed to achieve its full potential. The sale of Hadeed will enable Sabic to focus meanwhile on its strategy to become the preferred world leader in chemicals.”
The agreements align with PIF’s overarching plan to advance 13 key sectors, such as metals and mining, in accordance with the kingdom’s economic diversification strategy.
The fund has participated in various initiatives spanning areas like aviation, tourism, sports, gaming, camel milk, pharmaceuticals, and automobiles.
