Building firm targets rival in $145m deal to stem losses

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• Saudi’s Red Sea International wants to buy rival First Fix
• Company has losses of 63% on total capital
• Mergers on the increase in Mena region

Saudi construction firm Red Sea International Co has announced plans to buy a majority share in a rival for more than SAR544 million ($145 million).

The proposed deal to acquire 51 percent of The Fundamental Installation for Electric Work Company Ltd (First Fix) is part of a plan to turn around increasing losses at Red Sea.

According to the latest financial results, Red Sea incurred a net loss of SAR19.5 million on SAR118 million revenue for the three months to the end of March when accumulated losses rose to SAR191 million, which represents 63 percent of total capital. 

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Management said in a filing to the Saudi Stock Exchange that it is focusing on an entity wide cost optimisation and reduction plan.

The Middle East and North Africa (Mena) region saw a 42 percent increase in mergers in the first three months of 2023 compared to the same period last year.

EY’s Mena Insights report, which came out earlier this month, revealed 165 deals worth $25.8 billion in Q1.

The Saudi construction sector is currently enjoying a period of growth with real estate and infrastructure projects estimated at $1.1 trillion.

Last month the Royal Institution of Chartered Surveyors named Saudi Arabia as one of the world’s most active markets during Q1. 

Under the First Fix arrangement SAR250 million will be paid initially, with the remainder settled within four months subject to the deal meeting regulatory and due diligence conditions, Red Sea added in the filing. 

Following the announcment shares in Red Sea International were up by 3.5 percent compared to the previous day’s close.

First Fix, which was established in 2015, employs over 8,000 people and has worked on 200 projects across the GCC.

During 2022 First Fix recorded record revenue of SAR1.5 billion with a net profit of SAR148 million. It also has an order backlog of SAR3.4 billion.

Red Sea said it will gain a “critical stream of electromechanical and civil construction capability” through the acquisition.

First Fix will continue to be independently run and managed by its current executive and management team.

Under Tadawul rules, if company losses amount to half of the issued capital, the board of directors has 180 days to call for an extraordinary general assembly meeting to consider the continuation of the company.