Saudi ‘s Public Investment Fund (PIF) has acquired Saudi Iron and Steel Company (Hadeed), a wholly-owned subsidiary of Saudi Basic Industries Corporation (SABIC), in a deal SABIC said was worth 12.5 billion riyals ($3.3 billion). The Fund also announced the acquisition of Al Rajhi Steel Industries Company (Rajhi Steel) from Al Rajhi Investment, in exchange for a capital increase and subscription for new shares in Hadeed.
What does the Fund’s acquisition of these two companies mean?
With these two deals, the Public Investment Fund (PIF) has entered the Saudi steel industry by adding to its portfolio the Kingdom’s largest steel manufacturer, Hadeed, which in turn has acquired Rajhi Steel in its entirety, with both companies producing more than 8 million tons per year.
Thus, Saudi Arabia’s sovereign wealth fund is expected to create a new national steel giant through this acquisition.
The Kingdom relies heavily on the mining sector, which is one of the most important investment pillars targeted in Vision 2030, due to the Kingdom’s advantage: the availability of unexploited mineral wealth in the Kingdom, and the Kingdom’s geographical location to connect the three continents (Asia, Africa and Europe).
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About 400 applications for licenses to invest in the mining sector in general by foreign investors and international companies, apart from applications from local investors, are in the process.
The Fund believes that the two deals will support its efforts to contribute to the development of local industry and meet the growing local demand for steel products in the construction and building sector, vehicles, utilities, renewable energy, transportation and logistics, in line with the objectives of the Kingdom’s Vision 2030.
“These agreements will combine the fund’s financial capabilities and industrial expertise with the leading technical and commercial expertise of Hadid and Al Rajhi, to create a national champion in the steel sector in Saudi Arabia,” said Yazid Al-Humaid, Deputy Governor and Head of the General Department of Investments in the Middle East and North Africa at the Public Investment Fund.
The expansion of the Public Investment Fund in the mining sector locally coincides with its global expansion as well, as it entered into a joint venture with Saudi Arabian mining company Ma’aden in late July to buy 10 percent of the base metals unit of the Brazilian company Vale, in a deal worth $2.6 billion.
Vale, Brazil’s largest mining company, was granted interests in mines producing copper, nickel and other industrial metals, from Indonesia to Canada.
In May, Saudi Aramco, the Public Investment Fund and China’s Baoshan Iron and Steel Company signed an agreement to build the kingdom’s first steel sheet manufacturing complex.
The complex is expected to have an annual production capacity of 1.5 million tons and will be built in Ras Al Khair Industrial City, one of the four new special economic zones recently announced by Saudi Crown Prince Mohammed bin Salman.
Last year, the kingdom laid out plans to build three iron and steel projects worth 35 billion riyals, with a combined production capacity of 6.2 million tons, as part of Vision 2030.
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