Saudi Vitrified close to acquisition MOU
Company aims to purchase major water pipe manufacturer
Saudi Vitrified Clay Pipe is close to signing a Memoradum of Understanding to buy a major water pipe manufacturer in a stock-for-cash deal.
The Riyadh-based company, which supplies piping infrastructure for residential and industrial construction, said it aims to buy Arabian Company for Water Pipes – also known as Acwa Pipe – outright, issuing shares to raise cash to partially fund the acquisition.
Saudi Vitrified added in a stock market note that the two companies’ businesses are “complementary” and their alliance would help them benefit from the combined economies of scale and diversification and facilitate “complementary projects”.
The two companies will have separate financial advisers providing guidance on the acquisition, according to Saudi Vitrified on the Tadawul stock exchange.
“The parties will agree on the fair values and then determine the final number of shares to be issued by the purchasing company to other shareholders in the target company and the cash portion of the deal and the signing of an agreement to acquire the final [amount] according to the number of shares to be issued.”
An extraordinary general meeting will be called by the two companies, with no completion of the deal until shareholder approval.
Saudi Arabia is currently undergoing an industrial revolution to complement the boom in construction across the country. It has seen the development of the country’s first major aluminium facility through a joint venture of Saudi Arabian Mining Company and Alcoa along with continued investment in petrochemicals and electricity.
Sabic, the world’s biggest petrochemical maker, based in Riyadh, saw shares rise 2.5% yesterday after a week break in the markets.
The pipe industry straddles the industrial and construction activity, and in the last year many of the listed companies have further developed plans to expand their production.
Last year Saudi Vitrified added 15,000 tonnes annual capacity to its second factory to bring the total capacity to 85,000 tons and total production capacity to 185,000 tonnes.
Saudi Steel Pipe, the only Gulf manufacturer of pipes that uses hot induction bending, is working on a new manufacturing facility in Jubail with German and Saudi partners, according to Mohammed Al-Bawardi, sales manager, along with a plant in Dammam.
Saudi Vitrified shares climbed 3.1% to SAR 57.5 yesterday.