Saudi Wealth fund forges $3.3 billion steel giant in Saudi Basic Industries' Deal

Home
Industry News
Saudi Wealth fund forges $3.3 billion steel giant in Saudi Basic Industries' Deal

Saudi Wealth fund forges $3.3 billion steel giant in Saudi Basic Industries' Deal

Industry News
Sep 07,23

Saudi Arabia's sovereign wealth fund is poised to establish a new national steel powerhouse through the acquisition of Saudi Basic Industries' (Sabic) metals division for an enterprise value of 12.5 billion riyals ($3.3 billion).

The Public Investment Fund (PIF) will take ownership of Saudi Iron & Steel Company from Sabic, while, in a separate transaction, Sabic's steel arm, Hadeed, will secure AlRajhi Steel Industries in exchange for equity, as per an official statement. The deal is anticipated to be finalized by the conclusion of the first quarter of 2024, with the final sale price to be determined at that time.

Sabic's stock initially surged by 1.92%, reaching 90.1 riyals per share before retracing some gains. This agreement underscores the growing influence of the Saudi wealth fund on the largest economy in the Arab world. The PIF plays a pivotal role in the nation's efforts to diversify its revenue streams away from oil sales, with initiatives spanning the development of an automotive manufacturing hub, tourism endeavours, and the construction of expansive new urban centres.

Yazeed Al-Humied, the PIF's deputy governor and head of Middle East and North Africa investments, stated, "These transactions will leverage PIF's financial capabilities and industry expertise, together with Hadeed and Rajhi Steel's leading technical and commercial proficiency, to create a dominant player in Saudi Arabia's steel sector."

PIF, led by Crown Prince Mohammed bin Salman, the kingdom's de facto ruler, had previously held a 70% stake in Sabic before selling it to state-controlled oil giant Saudi Aramco in 2019. In July, it embarked on its first significant venture into global metals with a $2.6 billion investment in Vale SA's base metals unit.

Sabic, the world's most valuable chemical company, views the divestiture of Hadeed as an opportunity to sharpen its focus on its core petrochemicals production business. The chemical manufacturer has grappled with the challenges posed by a weakening global economy, reporting an 85% decline in profits during the second quarter.

Source: Business Standard