Hadeed is engaged in the manufacture of steel products. Credit: SABIC.

Saudi Basic Industries Corporation (SABIC) has signed an agreement to sell its subsidiary Saudi Iron and Steel Company (Hadeed) to the Public Investment Fund (PIF).

According to Reuters, the agreement takes Hadeed’s enterprise value to SR12.5bn ($3.33bn).

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Proceeds from the sale will be used by SABIC to support its growth in the chemicals industry.

Subject to customary approvals from the relevant authorities and satisfaction of certain conditions, the transaction is planned for completion before the end of Q1 2024.

Simultaneously, as per a cross-conditional share exchange agreement, Hadeed will purchase a 100% stake in AlRajhi Steel Industries Company (Rajhi Steel) from Mohammed Abdulaziz AlRajhi & Sons Investment Company. This exchange involves newly issued shares in Hadeed.

PIF head of MENA investments and deputy governor Yazeed A Al-Humied said: “These transactions will bring together PIF’s financial capabilities and industry experience with Hadeed and Rajhi Steel’s leading technical and commercial expertise, to create a national champion in Saudi Arabia’s steel sector.

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“They also build on PIF’s mandate to establish new strategic partnerships in order to enable the private sector.”

PIF said the two transactions comply with its efforts to accelerate industrial development while helping in meeting growing demand for steel and improving steel production capabilities in Saudi Arabia.

As part of its wider strategy, PIF intends to focus on developing 13 strategic sectors including metals and mining.

In a press statement, PIF said: “Furthermore, the transactions will contribute towards the growth of key downstream sectors such as local construction, automotive, utilities, renewables, transport and logistics, in line with Saudi Vision 2030.”