Posted on 05 Sep 2023
Saudi Public Investment Fund (PIF), in line with its focus on developing 13 strategic sectors, including the Metals and mining sector, has agreed to acquire petrochemical giant Sabic's wholly-owned steel unit Saudi Iron and Steel Company, Hadeed, for SAR 12.5 billion ($3.33 billion). Under the terms of the deal, Hadeed will buy 100% of the shares of Al Rajhi Steel Industries, the country's third largest long producer, from Mohammed Abdulaziz Al Rajhi & Sons Investment Company (Rajhi Invest) in exchange for newly issued shares in Hadeed, notes Kallanish.
Subject to regulatory approvals, which are expected to be completed by the end of the first quarter of 2024, the actual transaction price will be known accordingly, Sabic says in a stock exchange filing seen by Kallanish.
Hadeed, located on the east coast, produces 3.5 million tonnes of rebar and coils and 2.3mt of flats, while Rajhi has a 350,000 tonne per annum rebar mill at its Riyadh site and an 850,000 tonne per annum electric arc furnace billet plant on the west coast.
If the transactions are completed as planned, PIF will control almost 70% of the rebar market in Saudi Arabia.
"The Transactions align with PIF’s broader efforts to accelerate Saudi Arabia’s industrial development and will contribute to meeting the growing local demand for steel and improving Saudi Arabia’s steel production capabilities. Furthermore, the Transactions will contribute towards the growth of key downstream sectors, such as local construction, automotive, utilities, renewables, transport, and logistics, in line with Saudi Vision 2030.", said PIF in a separate release
Commenting on the acquisitions, Deputy Governor and Head of MENA Investments at PIF, Yazeed A. Al-Humied, said, "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.”
Hadeed's contribution to Saudi Arabia's construction sector and Sabic's growth has been remarkable. After Hadeed's sales, Sabic will focus on its strategy to become the preferred world leader in chemicals, opined Sabic CEO Abdulrahman Al-Fageeh.
On his side, the Board Chairman of Rajhi Invest, Yazid Mohamed Al-Rajhi, commented, “We’re excited to bring together our capacity and expertise, alongside that of PIF and Hadeed, to enable Hadeed to meet the future demands of its customers better.’’
"I think it will positively impact the rebar market because PIF will focus on profitability rather than utilising installed production capacities. Current Hadeed's price policy in the market is based on achieving 100% utilisation regardless of profitability.", opined a senior mill official.
Hadeed's first-half revenue declined 25% on-year to SAR 6.33 billion from SAR 8.39 billion in H1 2022. January-June Ebitda dipped 91% to SAR 100m versus SAR 1.12 billion a year earlier. Loss from operations was SAR 450m versus an income of SAR 530m recorded a year earlier.
Source:Kallanish
