Sabic to sell steel subsidiary to PIF for $3.3bn

Reuters/Umit Bektas

Saudi Basic Industries Corporation (Sabic) has signed an agreement to sell its 100 percent stake in its steel manufacturing subsidiary to the Public Investment Fund (PIF) for SAR12.5 billion ($3.33 billion).

The final sale price for Saudi Iron & Steel Company (Hadeed) will be determined only on the deal closure date, which is expected to be before the end of Q1 2024, Sabic said in a statement to the Saudi bourse on Sunday.

The transaction will provide Sabic with liquidity, which will be used to reinforce its growth in the chemicals industry.

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The fair valuation of Hadeed’s net assets is expected to result in a non-cash loss of SAR2 billion to SAR 2.5 billion in Sabic’s third-quarter earnings.

Yazeed A Al-Humied, deputy governor and head of Mena Investments at PIF, said the steel industry is “foundational” to the Saudi economy’s growth and this latest deal was part of PIF’s aim “to create a national champion” within the sector.

The steel sector plays a vital part in the kingdom’s massive development plans as part of Vision 2030. Real estate consultancy company Knight Frank last year described Saudi Arabia as the biggest construction site the world has ever seen as projects valued at over $1.1 trillion are under way in the kingdom.

It said the Red Sea city of Jeddah has $90 billion worth of development plans including 89,000 homes, more than 2,700 hotel rooms, 1.4 million sq m of retail space and 250,000 sq m of new offices.

Major infrastructure projects in the city include the expansion of Jeddah Islamic Port and the $7 billion Saudi Land Bridge Project, a rail link connecting the kingdom’s seaports on the Red Sea coast with those on the coast of the Arabian Gulf via Riyadh.