According to a statement on its website on Sunday, the Saudi Public Investment Fund announced a deal to launch a giant company for the iron and steel industry through its acquisition of the two largest iron companies in the Kingdom.
According to two separate statements from the Public Investment Fund and the Saudi Basic Industries Corporation (SABIC), the Fund signed an agreement to acquire 100 per cent of the Saudi Iron and Steel Company (Hadeed) shares, affiliated with SABIC, for 12.5 billion riyals ($3.3 billion). On a separate deal, Hadeed acquires 100 per cent of Al Rajhi Steel Company, a subsidiary of Al Rajhi Investment Company, in exchange for increasing capital and subscribing to new shares in Hadeed Company.
The Saudi sovereign fund said that these deals would support its efforts to contribute to the development of the local industry and meet the growing local demand for iron products in the construction sector, vehicles, service facilities, renewable energy, transportation and logistics services, in line with the goals of the Kingdom’s Vision 2030.
According to the statement, the deals will bring together the high-quality facilities of the “Hadeed” and “Al Rajhi Steel” companies, in addition to benefiting from the administrative capabilities and technical and commercial expertise that they possess in the iron sector in the Kingdom, which contributes to raising production capacity and increasing operational efficiency.
Yazeed bin Abdul Rahman Al-Humaid, Deputy Governor and Head of the General Administration of Investments in the Middle East and North Africa at the Public Investment Fund, said: “The deals will combine the Fund’s financial capabilities and investment expertise in the sector with the technical and commercial expertise of Al Rajhi Steel and Hadeed companies.” “This contributes to the development of a national leadership system in the steel sector and is also in line with the Fund’s role in creating strategic partnerships that contribute to empowering the private sector.”
For its part, SABIC said in a disclosure to the Saudi Stock Exchange that selling its entire stake in Hadeed Company aims to focus on and improve its core business in the petrochemical industries field, adding that it will use the proceeds of the sale to enhance the company’s growth in the chemicals field.
The statement stated that since the transaction was conducted according to the so-called “deal completion accounts” mechanism, the final sale price would not be determined except on the deal completion date, which is expected to be before the end of the first quarter of 2024.
The statement indicated that the sale process completion is subject to obtaining approvals from the competent authorities and fulfilling certain conditions in the deal documents.
According to an explanatory statement from SABIC, according to the fair value of the net assets of Hadeed Company, it is expected that there would be a negative impact of the deal, with SABIC incurring non-cash losses worth between 2 and 2.5 billion riyals and the financial effect is envisioned to appear in the company’s results for the third quarter of this year.
Hadeed was established in 1979 and has contributed significantly to SABIC’s growth, supplying its local and international customers with about 6 million metric tons of steel annually, as it is the largest steel producer in the Gulf region, according to SABIC’s statement.
SABIC, which was founded in 1976, is one of the largest international companies in the petrochemical industry field. It is listed on the Saudi Stock Exchange, and its headquarters is in Riyadh. Saudi Aramco currently owns 70 per cent of its shares, and the remaining 30 per cent is traded on the Saudi stock market, according to its website.
SABIC was 70 per cent owned by the sovereign fund before this stake was transferred to the state-controlled Aramco Company in 2019.