Saudi Arabia’s Public Investment Fund (PIF) has entered into a definitive agreement to acquire full ownership of the Saudi Iron & Steel Company (Hadeed) from Saudi Basic Industries Corporation (Sabic) in a transaction valued at 12.5 billion Saudi riyals ($3.3 billion). This move is part of the kingdom’s efforts to accelerate its industrial development.
The deal is expected to be finalized by the end of the first quarter of 2024, according to a filing by Sabic, the largest petrochemicals company in the Middle East, to the Tadawul stock exchange. The exact sales price will be disclosed upon closing.
In addition, Hadeed will acquire a 100 percent shareholding in Al Rajhi Steel Industries Company (Rajhi Steel) from Mohammed Abdulaziz Al Rajhi & Sons Investment Company (Rajhi Invest) through a cross-conditional share exchange agreement. This will be done in exchange for newly issued shares in Hadeed. The details of PIF’s and Rajhi Invest’s final shareholdings in Hadeed will be determined based on the closing mechanics specified in the agreements.
Yazeed Al Humied, Deputy Governor and Head of Middle East and North Africa Investments at PIF, stated, “These transactions will combine PIF’s financial capabilities and industry expertise with Hadeed and Rajhi Steel’s leading technical and commercial knowledge, creating a national champion in Saudi Arabia’s steel sector.”
These agreements align with PIF’s broader objective of developing the local industrial sector and establishing strategic partnerships that enhance the private sector’s contribution to the economy.
The deals will address the increasing domestic demand for steel and enhance Saudi Arabia’s steel production capabilities. They will also foster the growth of downstream sectors such as construction, automotive, utilities, renewables, transport, and logistics.
Saudi Arabia, the largest economy in the Arab world, is actively expanding its industrial, manufacturing, and mining sectors as part of its Vision 2030 strategy, which aims to reduce reliance on oil revenue and diversify the economy.
Earlier this year, Saudi Aramco, PIF, and China’s Baoshan Iron and Steel signed an agreement to construct the kingdom’s first steel plate manufacturing complex. The complex, expected to have an annual production capacity of up to 1.5 million tonnes, will be located in Ras Al Khair Industrial City, one of the recently announced special economic zones by Saudi Crown Prince Mohammed bin Salman.
Sabic stated that the proceeds from the sale of Hadeed will be utilized to strengthen its growth in the chemicals industry. The divestiture will allow Sabic to optimize its portfolio and concentrate on its core business.
The fair valuation 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 earnings.
Abdulrahman Al Fageeh, Chief Executive of Sabic, acknowledged Hadeed’s potential to become one of the most significant iron and steel companies in the GCC region. He emphasized the importance of finding the right buyers to unlock Hadeed’s full potential, enabling Sabic to focus on its strategy of becoming a global leader in chemicals.
These deals align with PIF’s broader strategy to develop 13 strategic sectors, including metals and mining, as part of the kingdom’s economic diversification plans. The fund has been involved in various projects across sectors such as aviation, tourism, sports, gaming, camel milk, pharmaceuticals, and automotive.