Saudi PIF, French private equity group to acquire 38% of Heathrow airport

Saudi PIF, French private equity group to acquire 38% of Heathrow airport
Heathrow, one of the world’s busiest airports, is owned by the consortium FGP Topco Limited with Spanish infrastructure giant Ferrovial holding the lead role. (Wikipedia)
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Updated 16 June 2024
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Saudi PIF, French private equity group to acquire 38% of Heathrow airport

Saudi PIF, French private equity group to acquire 38% of Heathrow airport
  • Ferrovial to remain as shareholder under revised deal for UK’s busiest hub

LONDON: Saudi Arabia’s sovereign wealth fund and a French private equity group will acquire a 38 percent stake in Britain’s busiest airport, Heathrow, officials announced on Friday.

Dutch-based transport company Ferrovial SE said the Public Investment Fund and Ardian had made a revised offer to acquire shares representing 37.62 percent of the share capital of FGP Topco, the parent company of Heathrow Airport Holdings Ltd, for more than £3.2 million ($4.1 million).

Under the new agreement, Ferrovial, which operates in more than 15 countries, will remain as a shareholder with shares representing 5.25 percent of the issued share capital of FGP Topco.

Following the sale, the Topco shareholders and Ferrovial will together hold shares “representing 10 percent of the issued share capital,” while PIF and Ardian will buy 22.6 percent and 15 percent respectively of FGP Topco through separate vehicles, Ferrovial said.

“The parties have been working toward satisfaction of the condition for the sale of the Tagged Shares to be sold alongside Ferrovial’s shares by exploring different options to satisfy the same,” the statement added.

The deal remains subject to regulators’ approval, Ferrovial said.

In November, Ferrovial had said it was planning to offload its stake, with PIF taking 10 percent and Ardian taking 15 percent, but the deal has been amended to allow FGP Topco shareholders to sell their shares on the same terms under so-called “tag-along rights.”

“Ardian is pleased to have worked closely with the parties to find this revised agreement and reiterates its strong commitment to investing in the UK,” the French company said in a separate statement.

The private investment house, which manages or advises $166 billion of assets on behalf of more than 1,600 clients globally, added that it “actively supports its assets to accelerate their transformation by leveraging data and new technologies to reduce emissions, creating new, more sustainable revenue sources, becoming more independent and resilient to external shocks, and improving their impact on both local and global environments.”


GCC banks eye Turkiye, Egypt and India for growth prospects

GCC banks eye Turkiye, Egypt and India for growth prospects
Updated 24 July 2024
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GCC banks eye Turkiye, Egypt and India for growth prospects

GCC banks eye Turkiye, Egypt and India for growth prospects
  • Favorable economic conditions and opportunities draw interest

RIYADH: Gulf Cooperation Council banks aim to diversify their business models and enhance profitability by entering high-growth markets such as Turkiye, Egypt and India, a new report has revealed. 

Fitch Ratings noted that this growing interest was due to favorable economic conditions and attractive growth opportunities in these countries. 

Notably, the appetite for expansion in Turkiye has increased following macroeconomic policy shifts, while interest in Egypt is fueled by enhanced stability and privatization opportunities.

Despite higher acquisition costs in these regions, the report said that GCC banks remain focused on leveraging the potential of these markets to offset slower growth at home. 

The GCC banking sector has consistently delivered high returns on equity and impressive valuation multiples compared to global standards, according to a McKinsey June report.

The strategic diversification of GCC economies beyond oil, coupled with prudent regulatory frameworks, has bolstered banking stability and profitability.

Elevated interest rates have further enhanced bank profits, contributing to their returns. Over the past decade, the region’s banks have outperformed the global average in return on equity, or ROE, maintaining an advantage of three to four percentage points during 2022 to 2023.

Although global banking valuations are historically low, GCC banks continue to generate value with ROE surpassing their cost of equity. 

Despite record profits driven by elevated interest rates for banks globally and in the GCC, McKinsey cautions executives to balance short-term gains with long-term strategic objectives.

Investing in transformative change and efficiency is essential for sustaining a competitive edge when interest rates eventually decline. 

GCC banks’ primary exposure outside their home region was concentrated in Turkiye and Egypt, where they collectively held about $150 billion in assets by the end of the first quarter of 2024, according to Fitch Rating. 

This significant presence underscores the strategic importance of these markets for GCC banks’ growth ambitions.

Additionally, there is growing interest in India, particularly from UAE-based banks, driven by the strong and expanding financial and trade links between the two countries.

Turkiye, Egypt and India each boast significantly larger populations compared to GCC countries, presenting greater potential for banking sector growth due to their robust real gross domestic product growth prospects and comparatively smaller banking systems. 

For instance, the banking system assets to GDP ratios in these countries are below 100 percent, whereas in the largest GCC markets, this ratio exceeds 200 percent, according to the report. 

Furthermore, the private credit to GDP ratios were notably lower in 2023, standing at 27 percent in Egypt, 43 percent in Turkiye, and 60 percent in India, highlighting substantial room for expansion in these banking sectors. 

GCC banks are increasingly looking to expand in Turkiye due to a favorable shift in the country’s macroeconomic policies following the presidential election last year, according to Fitch. 

These changes have reduced external financing pressures and improved macroeconomic and financial stability, prompting Fitch to upgrade its outlook for the Turkish banking sector to “improving.” 

Fitch projects Turkish inflation to drop from 65 percent in 2023 to an average of 23 percent in 2025, with expectations that GCC banks will cease using hyperinflation reporting for their Turkish subsidiaries by 2027.

The enhanced stability of the Turkish lira is likely to bolster returns on GCC banks’ Turkish operations. 

Simultaneously, GCC banks are showing growing interest in Egypt, driven by a better macroeconomic environment, opportunities from the authorities’ privatization program, and the expansion of GCC corporations in the country. 

Fitch has recently upgraded its outlook on the operating environment score for Egyptian banks to positive, anticipating greater macroeconomic stability.

This improvement is attributed to Egypt’s substantial foreign direct investment deal with the UAE, a strengthened International Monetary Fund deal, increased foreign exchange rate flexibility, and a stronger commitment to structural reforms. 

Fitch expects the Egyptian banking sector’s net foreign assets position to improve significantly this year, supported by robust portfolio inflows, remittances, and tourism receipts.

Egyptian inflation is forecasted to decrease from 27.5 percent in June 2024 to 12.3 percent in June 2025, potentially leading to policy interest rate cuts starting from the fourth quarter of 2024. 

Fitch noted that while the Egyptian banking market presents high entry barriers, GCC banks might find opportunities to acquire stakes in three banks through the authorities’ privatization program.

The expansion of GCC companies, especially those from the UAE, could also drive increased GCC bank presence in Egypt. 

However, the rising cost of acquiring banks in Turkiye, Egypt and India might pose challenges for GCC banks’ acquisition plans.

Price-to-book ratios have risen, particularly in Turkiye and India, reflecting better macroeconomic prospects and reduced operational risks. Acquisitions in these lower-rated markets could potentially weaken GCC banks’ viability ratings, depending on the size of the acquired entity and the resulting financial profile.

Nevertheless, nearly all GCC banks’ long-term issuer default ratings are supported by government backing and are unlikely to be affected by these acquisitions. In this context, economic forecasts play a crucial role in shaping these expansion strategies.

The World Bank has updated its growth projections in April for various countries, reflecting significant opportunities and risks. 

For instance, Saudi Arabia’s economic growth forecast for 2025 has been raised to 5.9 percent, up from the previous estimate of 4.2 percent, signaling robust long-term prospects. 

For the UAE it is now 3.9 percent for 2024, up from 3.7 percent, with a further rise to 4.1 percent in 2025.

Kuwait and Bahrain are also expected to see modest growth increases, while Qatar’s 2024 forecast has been reduced to 2.1 percent but adjusted upward to 3.2 percent for 2025.


Saudi finance minister heads Kingdom’s delegation to G20 ministerial meeting in Brazil

Saudi finance minister heads Kingdom’s delegation to G20 ministerial meeting in Brazil
Updated 24 July 2024
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Saudi finance minister heads Kingdom’s delegation to G20 ministerial meeting in Brazil

Saudi finance minister heads Kingdom’s delegation to G20 ministerial meeting in Brazil
  • Delegation includes Governor of the Saudi Central Bank Ayman Al-Sayari

RIYADH: Ongoing global challenges, financial sector issues, and the international economic outlook will be key topics as Saudi Arabia participates in a meeting of G20 finance ministers and central banks in Brazil this week.

Finance Minister Mohammed Al-Jadaan will head the Kingdom’s delegation at the third Finance Ministers and Central Bank Governors meeting in Rio de Janeiro from July 25 to 26 under the Brazilian G20 Presidency, according to a ministry statement.

Other topics on the agenda include financial inclusion, international taxation cooperation, climate change, and financing sustainable development as well as capital flows, global debt, and reform of Multilateral Development Banks.

This falls in line with the Ministry of Finance’s goal of doubling the size of the financial sector and boosting gross domestic product growth.

It also cements the ministry’s aim to align the financial market’s size with that of the banking sector, while establishing an inclusive system benefitting most Saudi citizens.

According to the 2023 Financial Sector Development Program document, the Saudi Capital Market Authority plans to boost assets under management to 29.4 percent of the gross domestic product this year by increasing the investment environment and attracting more investors.

The Saudi delegation includes the Governor of the Saudi Central Bank Ayman Al-Sayari, along with other senior officials from the Saudi Ministry of Finance and SAMA.

The meeting convenes G20 ministers and central bank governors, several representatives of invited countries, and heads of global and regional financial organizations.

In June, the Riyadh-based Financial Academy unveiled its new strategy for 2024-2026, focusing on enhancing human capabilities in the sector through training programs and professional certifications.  

The academy aims to increase the number of trainees and improve the quality of its services to meet the evolving needs of the industry.


Historic Jeddah to support securing local workforce with new agreement

Historic Jeddah to support securing local workforce with new agreement
Updated 24 July 2024
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Historic Jeddah to support securing local workforce with new agreement

Historic Jeddah to support securing local workforce with new agreement
  • Deal aims to boost collaboration by leveraging resources to enhance knowledge exchange and empower local talent
  • Saudi Arabia aims to unlock its tourism potential and position the region as a premier global destination

RIYADH: Saudis will receive training and support to help secure hospitality jobs in Historic Jeddah thanks to a new agreement between the Ministry of Tourism and Al-Balad Development Co. 

The memorandum of understanding aims to boost collaboration by leveraging resources to enhance knowledge exchange and empower local talent across the hotel, heritage tourism, and tour guiding industries.

The Public Investment Fund’s wholly-owned company serves as the heritage-focused master developer and asset manager for Jeddah’s Al-Balad area. Spanning 2.5 sq. km along the Red Sea coast, the site recently marked its 10th anniversary on the UNESCO World Heritage List. 

Saudi Arabia aims to unlock its tourism potential and position the region as a premier global destination by facilitating investment, promoting cultural heritage, and encouraging innovation in the hospitality sector. 

The Kingdom targets attracting over 150 million visitors by 2030, creating 1.6 million tourism jobs, and increasing the sector’s contribution to gross domestic product to over 10 percent.  

The MoU was signed by Jamil Hasan Ghaznawi, CEO of Al-Balad Development Co., and Hind Al-Zahid, acting deputy for human capital development at the Ministry of Tourism, with the signing witnessed by Minister of Tourism Ahmed Al-Khateeb, according to the Saudi News Agency. 

Through its Al-Balad Hospitality arm, the firm plans to deliver over 1,800 hotel units in the area in the coming years. 

The company aims to offer visitors unique hotel experiences that blend authenticity and history with modern comforts in the heart of Historic Jeddah. 

Launched in early 2024, Al-Balad Hospitality provides a range of accommodations, from heritage hotels in Jeddah to redefined authentic stays.

The Jeddah Historic District, once a Red Sea fishing village and key Silk Road trading hub, now boasts over 600 historic buildings with distinctive architecture and a rich cultural heritage. 

The Ministry of Culture oversees the Jeddah Historic District program, which aims to revitalize the area and establish it as a cultural and heritage destination.


Kuwait turns to deficit of 1.6 bln dinars in FY 2023/24, finance ministry says

Kuwait turns to deficit of 1.6 bln dinars in FY 2023/24, finance ministry says
Updated 24 July 2024
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Kuwait turns to deficit of 1.6 bln dinars in FY 2023/24, finance ministry says

Kuwait turns to deficit of 1.6 bln dinars in FY 2023/24, finance ministry says
  • Kuwait’s oil revenues fell to 21.528 billion dinars in FY 2023/24

KUWAIT CITY: Kuwait registered a deficit of 1.6 billion dinars ($5.23 billion) in fiscal year 2023/24 from a surplus of 6.4 billion dinars in the previous year, its finance ministry said in a statement on Wednesday.
Kuwait’s oil revenues fell to 21.528 billion dinars in FY 2023/24, based on an oil price of $86.36 a barrel. This was a fall in revenue from 26.713 billion dinars in the previous year.
The Gulf state has had to comply with production cuts by the OPEC+ producer group amid lower oil prices this year while making slow progress on diversifying revenue sources compared with its Gulf neighbors.
Expenditures reached 25.206 billion dinars compared to 22.370 billion dinars in the previous year. Kuwait’s fiscal year ends on March 31.
Kuwait holds some of the world’s largest oil reserves and has strong fiscal and external balance sheets, but political and institutional gridlock has hampered investment and reforms aimed at reducing its heavy reliance on oil. 


NEOM projects to receive $27.7m of cement from Al Jouf and Webuild partnership 

NEOM projects to receive $27.7m of cement from Al Jouf and Webuild partnership 
Updated 24 July 2024
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NEOM projects to receive $27.7m of cement from Al Jouf and Webuild partnership 

NEOM projects to receive $27.7m of cement from Al Jouf and Webuild partnership 
  • The company said the contract is 41 months and is subject to increased quantities
  • Deal involves the sale of cement for various developments

RIYADH: NEOM projects are set to receive cement worth SR104 million ($27.7 million) as Saudi Arabia’s Al Jouf Cement Co. partners with Italy’s Webuild SpA. 

The Saudi company has officially entered into an agreement with Webuild SpA, in a deal that involves the sale of cement for various developments.

In a statement released on Tadawul, Al Jouf detailed that the duration of the contract is 41 months from the date of signing and is subject to increased quantities. 

The company expects this agreement to have a positive impact on its financial statements starting from the third quarter of this year and continuing through the end of the contract period. 

The Kingdom’s $500 billion giga-project is at the northern tip of the Red Sea, east of Egypt across the Gulf of Aqaba and south of Jordan. 

NEOM is set to host several projects, including The Line, which is a mirrored structure that stretches 170 kilometers, 500 meters above the sea and 200 meters wide. 

Trojena is also part of NEOM’s regional plan, situated 50 kilometers from the Gulf of Aqaba coast. The mountainous area spans nearly 60 sq. kilometers and features elevations ranging from 1,500 to 2,600 meters. 

Earlier in May, NEOM announced that it will build a new marina and community also on the Gulf of Aqaba called Jaumur. 

The destination will be an exclusive residential community planned around a marina promenade for more than 6,000 residents, and will include 500 marina apartments and around 700 luxury villas.

Earlier this month, NEOM and American hospitality firm Equinox Hotels announced plans to open a resort on the coast of the Gulf of Aqaba as part of the recently unveiled Magna development. 

The luxury destination will feature 12 locations along 120 kilometers of coastline, and will include 15 hotels, 1,600 rooms, and over 2,500 residences. 

Emirates Steel, part of Emirates Steel Arkan Group, one of the largest publicly traded steel and building materials manufacturers in the region, also partnered with Eversendai, a global powerhouse in steel construction, earlier this month to build the NEOM Trojena Ski Village.