Saudi dairy firm Nadec to buy Danone unit via capital raise of $143 mn

Saudi Arabia’s National Agricultural Development Co., part owned by the sovereign wealth fund, will acquire Danone SA’s venture in the country, creating one of the kingdom’s largest dairy producers.

Nadec, as the company is known, will fund the acquisition of privately held Al Safi Danone through a capital increase of 536 million riyals ($143 million), it said in a statement to the Saudi stock market Sunday. Once the deal is completed, existing Nadec shareholders will own 61.25 per cent of the company, and Al Safi shareholders will hold 38.75 percent.

“The transaction will allow both companies to better serve customers and realize benefits not available on a standalone basis,” Abdulaziz Al Babtain, managing director of Nadec, said in the statement. “It will create a platform for future growth and, importantly, drive significant value creation for shareholders.”

Nadec shares rose as much as 8.4 per cent to 40.70 riyals. They closed at 39.38 riyals, the highest since September 2014.

Merger and acquisition activity in Saudi Arabia is picking up as slower economic growth encourages companies to combine to save costs, while new takeover rules make it easier to complete deals.

Sahara Petrochemical and Saudi International Petrochemical Co. said they were evaluating a merger earlier this month. HSBC Holdings Plc-backed Saudi British Bank and Alawwal Bank, in which Royal Bank of Scotland Group Plc owns a 40 percent stake, are in talks to merge, as are hospital operators Al Hammadi Co. for Development & Investment and National Medical Care Co.

Nadec, which is 20 percent owned by Kingdom’s Public Investment Fund, was advised by Morgan Stanley, while Al Safi was advised by Goldman Sachs.