Saudi Arabia’s M&A volume hits $955m in Q1, fueled by chemicals sector

Saudi Arabia’s M&A volume hits $955m in Q1, fueled by chemicals sector
Saudi Arabia was the only country in the region to show activity in the chemical sector in the first quarter of 2024. Shutterstock
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Updated 21 June 2024
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Saudi Arabia’s M&A volume hits $955m in Q1, fueled by chemicals sector

Saudi Arabia’s M&A volume hits $955m in Q1, fueled by chemicals sector

RIYADH: Saudi Arabia led the Middle East in mergers and acquisitions in the chemicals sector in the first quarter of 2024, with $500 million worth of deals, according to recent data.

Figures from financial markets platform Dealogic showed that the Kingdom’s total M&A deal volume during this period reached $955 million, with the chemicals sector accounting for 52.4 percent of the total. 

Saudi Arabia was the only country in the region to show activity in this sector, and a report from management consulting firm Kearney earlier this month suggested that chemical executives are expecting more M&As led by strategic investors such as national oil companies.

“Recent deals by major players like Aramco and ADNOC underscore the region’s commitment to leveraging M&A as a key growth lever, setting the stage for a dynamic and transformative period ahead,” said Jose Alberich, partner, Middle East and Africa at Kearney at the time.

The figures from Dealogic revealed that the professional services sector was the second targeted sector, with deals worth $160 million, accounting for a 16.8 percent share of the Kingdom’s total.

Technology was close behind with $138 million in deal value, capturing a 14.5 percent share. 

Retail and insurance sectors represented 7 percent and 4.1 percent of the total, respectively.

Across the region

The figures revealed that during the first three months of the year, the Middle East targeted M&A volume reached $6.21 billion, with technology being the leading sector with 42 total deals worth $1.56 billion. 

Finance followed with 9 deals amounting to $1.3 billion, while the oil and gas sector, which topped the list a year ago with deals valued at $3.5 billion, fell to the eighth place with just $273 million in deals.

According to Dealogic, domestic transactions were the dominant contributor, making up 55 percent of the Middle East’s M&A volume across 91 deals. In contrast, outbound transactions accounted for 45 percent with a total of 38 deals.

Kuwait emerged as the top contributor to GCC nations’ total M&A deal volume, amounting to $1.12 billion, all of which were outbound deals.

The UAE followed closely with a deal value of $988 million, of which 58 percent were domestic.

Saudi Arabia secured the third position with 18 deals valued at $955 million, of which 60 percent were outbound.

Compared to the same quarter of 2023, the Middle East’s deal volume declined by 27 percent. 

Global slowdown

In its report, Dealogic explained that global M&A activity experienced a significant decline during this period, with the number of transactions falling by 31 percent to 7,162, marking one of the quietest quarters for dealmakers in nearly two decades.

The slowdown was largely attributed to high capital costs, with Switzerland being the only major economy to cut interest rates in 2024. 

Additionally, geopolitical tensions, including the emergence of the Middle East as a new trouble hotspot alongside ongoing conflicts involving Russia and Ukraine, and tensions between Washington and Beijing over Taiwan, further contributed to the subdued activity in deal making.

Drivers of activity

In a paper published in September, the Boston Consulting Group said government support has been a driving force behind significant M&A activities among emerging market players in recent years, particularly in the Middle East, as firms aim at expanding their global presence.

Saudi Arabia’s SABIC acquired a 31.5 percent stake in Clariant, nearing the 33.3 percent threshold for a mandatory takeover bid under Swiss law. 

The UAE’s state-owned ADNOC purchased a 24 percent interest in OMV, increasing its indirect stakes in Borealis and Borouge, and is in talks to merge them.

ADNOC also made an $11 billion offer for Covestro, which was rejected, and expressed interest in Brazil’s Braskem. These moves highlight a trend of leveraging government support to enhance regional footprints and integrate into global value chains

Additionally, Saudi Aramco acquired Valvoline Inc.’s global products business for $2.7 billion in 2023. This acquisition, according to BCG, enhances Aramco’s lubricant portfolio by integrating Valvoline’s manufacturing and distribution network and its research and development capabilities.

The research highlighted three additional key reasons driving changes in macro trends in M&A, portfolio diversification, vertical integration, and technology acquisition.

Companies are increasingly expanding their portfolios through acquisitions to enter new markets and product segments, often over extended periods. Additionally, the focus has shifted from traditional feedstock-focused acquisitions to sustainable diversification of petrochemical value chains, prioritizing higher-margin and less cyclical businesses.

In essence, this means that rather than primarily acquiring companies to secure raw materials, the emphasis is now on achieving sustainable and balanced growth across the petrochemical value chain. The current priority is to invest in businesses that generate higher profits and are less affected by market fluctuations. This shift aims to create a more resilient and profitable business model in the long term.

This strategic emphasis on specialties is fostering vertical integration into downstream segments, as evidenced by significant acquisitions by industry leaders such as Saudi Aramco, SABIC, Thailand’s PTT, and Malaysia’s PETRONAS.

According to the BCG paper, gaining or retaining technology leadership is a key driver for M&A activity. Acquisitions and joint ventures are crucial for positioning companies as major suppliers in the e-mobility segment and the related electronic chemicals and battery industry.

As demand for sustainable solutions grows, companies are increasingly recognizing the potential of e-mobility. Through strategic M&A, including technology acquisitions and research and development investments, they aim to secure competitive advantages in this rapidly expanding market.

According to Dealogic, technology-focused deals accounted for 21 percent of the global M&A activity in the first three months of 2024. This was followed by healthcare at 14 percent and finance at 11 percent. 

Oil and gas stood at 9 percent, with utility and energy at 7 percent, and real estate and property sectors representing 5 percent of the total M&A activity.

AI attracting funds

Dealogic’s report highlighted that the largest global technology deals were driven by artificial intelligence. The surge in AI has significantly boosted Nvidia’s market capitalization to $2.4 trillion, with the company making investments in seven AI-related firms during this period.

Saudi Arabia also plans to establish a $40 billion fund dedicated to investing in artificial intelligence, according to a report from the New York Times in March. 

Set to launch in the second half of 2024 and spearheaded by Saudi Arabia’s Public Investment Fund, it aims to attract partnerships with US venture capital firm Andreessen Horowitz and other financiers, according to the report.

It will focus on supporting various AI-related ventures in Saudi Arabia, including chip makers and large-scale data centers, NYT wrote at the time.


Oil Updates – prices rise as investors look for signs US rate cuts to begin

Oil Updates – prices rise as investors look for signs US rate cuts to begin
Updated 8 sec ago
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Oil Updates – prices rise as investors look for signs US rate cuts to begin

Oil Updates – prices rise as investors look for signs US rate cuts to begin

TOKYO: Oil prices rose in early trade on Monday as investors keep a lookout for signs of a rate-cut cycle expected to begin as soon as September, according to Reuters.

Brent crude prices were up 48 cents, or 0.57 percent, at $83.10 a barrel by 2:35 a.m. Saudi time, and US West Texas Intermediate crude futures rose 42 cents, or 0.52 percent, to $80.55.

“Since the June FOMC meeting, inflation and labor market data have signalled that disinflation and labor market rebalancing are in place, which we expect will allow the Fed to begin its interest rate cutting cycle in September,” ANZ Research said in a note.

The US Federal Reserve will next hold a Federal Open Market Committee meeting on interest rates on July 30-31, at which investors expect the Fed to keep the rates unchanged, while looking for any signal of a cut coming later in the year.

On the political front, US President Joe Biden abandoned his reelection bid on Sunday under pressure from fellow Democrats and endorsed Vice President Kamala Harris as the party’s candidate to face Republican Donald Trump in November.

Slower-than-expected economic growth of 4.7 percent for China in the second quarter sparked concerns last week over the country’s demand for oil and continues to weigh on prices.

On Sunday, China released a policy document outlining known ambitions, from developing advanced industries to improving the business environment, with analysts spotting no sign of imminent structural shifts in the world’s second-biggest economy.

The 60-point document’s publication follows last week’s closed-door meeting of the Communist Party’s Central Committee that takes place roughly every five years. 


Global AI Summit in Riyadh to host top-level discussions on AI impact 

Global AI Summit in Riyadh to host top-level discussions on AI impact 
Updated 7 min 31 sec ago
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Global AI Summit in Riyadh to host top-level discussions on AI impact 

Global AI Summit in Riyadh to host top-level discussions on AI impact 
  • The event, organized by the Saudi Data and AI Authority, will focus on one of today’s most pressing global issues — AI technology

RIYADH: Saudi Arabia will welcome economic policymakers, major technology and artificial intelligence companies, international thought leaders, and heads of international organizations to Riyadh this September as the Global AI Summit returns for its third edition.

The event, organized by the Saudi Data and AI Authority, will focus on one of today’s most pressing global issues — AI technology — and will attempt to find solutions that “maximize the potential of these transformative technologies for the benefit of humanity,” a statement released Sunday said.

The third edition of the event will be held at the King Abdulaziz International Conference Center from Sept. 10 to 12 under the patronage of Saudi Crown Prince Mohammed bin Salman in his capacity as chairman of the board of directors at SDAIA, the statement added.

The GAIN Summit will take place amid increasing concerns about the impact of AI technologies and will reaffirm the Kingdom’s commitment to supporting international efforts aimed at enhancing human welfare in the face of the challenges associated with developing technology.

GAIN 2024 will focus more on AI than its previous editions in 2020 and 2022, with topics including innovation in the sector, key developments shaping a better future for AI, and fostering a supportive environment for human resources in the field.

Other topics include AI at local and global levels, the complementary relationship between humans and AI, business leaders in AI, the relationship between data and applications, GenAI, AI ethics, AI processors and infrastructure, and AI and smart cities.


Saudi industry minister to visit Brazil, Chile to explore lithium production

Saudi industry minister to visit Brazil, Chile to explore lithium production
Updated 6 min 13 sec ago
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Saudi industry minister to visit Brazil, Chile to explore lithium production

Saudi industry minister to visit Brazil, Chile to explore lithium production
  • Alkhorayaf will land in Brazil on Monday and leave for Chile, the world’s second-largest producer of lithium, next Sunday

RIYADH: Bandar Alkhorayaf, Saudi Arabia’s mining and industry minister, will visit Brazil and Chile this week, the ministry said on Sunday.

In Brazil, he will hold meetings with officials to discuss expanding the Kingdom’s mining capacity, food processing, and aviation, while in Chile he will explore lithium production, needed for electric vehicle batteries.

“This aligns with the Kingdom’s direction towards expanding the production of EVs,” a Saudi government statement said. 

Alkhorayaf will land in Brazil on Monday and leave for Chile, the world’s second-largest producer of lithium, next Sunday.

On the first leg of the tour in Brazil, Alkhorayaf will meet agricultural and industrial groups, including Minerva Foods, JBS, and BRF SA, as well as the Brazilian Mining Association and mining company Vale.

Brazil’s Energy Minister Alexandre Silveira said last month that Saudi Arabia’s Public Investment Fund plans to invest $15 billion in Brazil in areas such as green hydrogen, infrastructure, and renewable energy.

In Chile, the minister will meet his counterpart Aurora Williams, as well as mining companies Antofagasta, and Codelco, a state-run company tasked with bringing the Chilean government into the lithium industry.

Saudi Arabia’s sovereign wealth fund, the PIF, and the Kingdom’s mining company, known as Ma’aden, which is 67 percent owned by the PIF, formed a joint venture called Manara Minerals to invest in mining assets abroad.


Closing Bell: Saudi main index closes in green at 12,195  

Closing Bell: Saudi main index closes in green at 12,195  
Updated 21 July 2024
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Closing Bell: Saudi main index closes in green at 12,195  

Closing Bell: Saudi main index closes in green at 12,195  

RIYADH: Saudi Arabia’s Tadawul All Share Index rose on Sunday, gaining 6.73 points, or 0.06 percent, to close at 12,195.05.   

The total trading turnover of the benchmark index was SR6.12 billion ($1.63 billion), as 74 of the listed stocks advanced, while 154 retreated.   

The MSCI Tadawul Index also closed in green, gaining 2.46 points, or 0.16 percent, to close at 1,529.46.   

The Kingdom’s parallel market Nomu rose 67.8 points, or 0.26 percent, to close at 25,770.14. This comes as 27 of the listed stocks advanced while as many as 34 retreated.   

The best-performing stock of the day was Saudi Manpower Solutions Co., whose share price surged 9.88 percent to SR10.34. 

Other top performers include Maharah Human Resources Co. as well as Al-Baha Investment and Development Co., whose share prices soared by 8.35 percent and 8.33 percent, to stand at SR6.88 and SR0.13, respectively.   

The worst performer was Electrical Industries Co., whose share price dropped by 5.51 percent to SR6.00.    

Other notable declines included Alinma Hospitality REIT Fund and The Mediterranean and Gulf Insurance and Reinsurance Co., with share prices falling 3.38 percent to SR8.29 and 3.25 percent to SR29.80, respectively. 

On the announcement front, Saudi Tadawul Holding Co. reported a profit increase to SR146 million for the second quarter of 2024, reflecting a 55 percent rise from SR105.2 million in the same period last year.  

The company attributed this growth to a 50.3 percent increase in operating revenues, which reached SR741.1 million in the first half of 2024, up from SR493.0 million in the corresponding period of the previous year. 

According to a release on the bourse, Saudi Arabian Amiantit Co. reported a net profit of SR5.11 million for the second quarter of 2024, reversing a net loss of SR10.08 million from the same quarter last year, marking a 150.7 percent improvement.  

This positive shift was attributed to a 17.4 percent increase in revenue due to expanded sales and a higher volume of new orders. 

Kingdom Holding Co., Sumou Holding Co., and Jeddah Economic Co. have signed an agreement to establish a new SR6.8 billion fund to acquire the Alinma Jeddah Economic Fund, currently fully owned by Jeddah Economic Co. Kingdom Holding Co. will hold a 40 percent stake in the new fund. 


Saudi Arabia’s US treasury bond possession increases 22.46% year-on-year to $136.3bn

Saudi Arabia’s US treasury bond possession increases 22.46% year-on-year to $136.3bn
Updated 21 July 2024
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Saudi Arabia’s US treasury bond possession increases 22.46% year-on-year to $136.3bn

Saudi Arabia’s US treasury bond possession increases 22.46% year-on-year to $136.3bn

RIYADH: Saudi Arabia’s possession of US treasury bonds increased to $136.3 billion in May, compared to $111.3 billion for the same month in 2023.

The figures mark a 22.46 percent year-on-year increase.

Data released by the US Treasury Department placed Saudi Arabia in 17th spot among the largest investors in such financial instruments in May.

The report revealed that the Kingdom held bonds valued at $135.4 billion in April, compared to $135.9 billion and $131.1 billion in March and February, respectively.

The figures illustrate Saudi Arabia’s growing influence in international financial markets, highlighting a keen understanding of leveraging sovereign wealth to secure and strengthen the Kingdom’s global economic position.

Moreover, Saudi Arabia is the only Arab and Middle Eastern country among the top 20 major holders of US Treasury securities.

A report published in January by the Saudi Central Bank, also known as SAMA, revealed that its investments in foreign securities stood at $1 trillion at the end of December 2023.

SAMA also has $361.75 billion as deposits with banks abroad, the report added.

The data analysis also revealed that Japan emerged as the largest investor in US bonds in May, with holdings totaling $1.128 trillion. China and the UK followed, with portfolios valued at $768.3 billion and $723.4 billion, respectively. 

Luxembourg claimed the fourth spot with assets valued at $385.4 billion, while Canada and the Cayman Islands secured the fifth and sixth positions with treasury portfolios worth $354.5 billion and $336.5 billion, respectively. 

Ireland attained seventh spot with treasury reserves worth $317.7 billion, followed by Belgium and Switzerland, with assets amounting to $313 billion and $290.4 billion, respectively.

France held the 10th position with treasury assets amounting to $283 billion, while Taiwan and India occupied 11th and 12th places with portfolios worth $263.3 billion and $237.8 billion, respectively.

The data collected is primarily from US-based custodians and broker-dealers. Since American securities held in overseas accounts may not be attributed to the actual owners, the department said, the data may not provide a precise accounting of individual country ownership of treasury securities.