Two Major Cement Firms Looking to Merge in Saudi Arabia

Two cement companies owned by Saudi Arabia’s sovereign wealth fund – Public Investment Fund (PIF) – have signed a non-binding memorandum (MOU) to assess the feasibility of merging, they said in separate disclosure to Saudi exchange Tadawul on Sunday.

The two units – Yanbu Cement and Southern Province Cement (SPCC) – said that they set a deadline of one year to take a final decision on the merger proposal. However, neither companies gave details of their valuation nor the future strategic plans for the merged entity.

The proposed merger process is contingent upon the completion of due diligence and examination procedures that are compatible with the requirements of all relevant parties. It is further conditioned upon reaching agreement on the final terms and conditions of the merger agreement, as well as obtaining regulatory approvals from the competent authorities and approval from the general assemblies of both companies. It is important to note that entering into the MOU does not imply that the companies will agree to the proposed merger.

If the merger takes place, the new entity is said to become one of the biggest company in the Western region of the Kingdom and position itself as a major player in the country’s fragmented construction industry. PIF, which holds 10% stake in Yanbu and 37.4% in SPCC, lists both SPCC and Yanbu among its holdings.

SPCC Largest in Middle East

The Abha-based Southern Province Cement is one of the largest cement manufacturers in the Middle East with a market capitalisation of $1.39 billion and owns and operates three plants in Jazan, Assir, and Makkah with a combined manufacturing capacity of 40,000 tons per day.

SPCC usually cooperates with other national companies and put using national products as a priority in fulfilling its demands. SPCC adopted Nationalisations strategy. Training centers were established in its factories to train Saudis. SPCC, under the directions of its BOARD, started implementing plans to raise the Saudiasation percentage, and to raise the operational and productions efficiency to cope up with 2030 vision.

On the other hand, Yanbu Cement is the largest cement producer with an installed capacity of 7 million tons of clinker and a total dispatch capacity of over 10 million tons of cement per year. Yanbu Cement’s plant, which is headquartered in Jeddah, is located in Ras Baridi northwest of the Yanbu Port. The company’s market capitalisation is $1.17 billion.

SPCC’s net income rose 27% y-o-y to $16.57 million in the first quarter of 2024, while its revenues were down 16.4% y-o-y during the period to $66.9 million. Yanbu Cement’s net income was up 14.3% y-o-y to $15.56 million during the first three months of the year, with its revenues inching up 4.6% y-o-y to $62.49 million.