June 2020: Mergers & Acquisitions looming on Saudi economy’s horizon

As Saudi Arabia continues to pull together the economic repercussions of the COVID-19 pandemic which heavily weighed on the global economy, mergers & acquisitions between leading companies across all sectors are looming on the horizon.
 

The Kingdom also maintained its upward trend in the global competitiveness rankings covering economic performance, business, infrastructure, labor force, cybersecurity, education, among others.
 

Meanwhile, the country started on June 21 returning to normalcy by easing coronavirus restrictions and resuming some economic and commercial activities. Furthermore, domestic flights resumed while the Hajj pilgrimage has been announced with limited attendance.
 

Argaam compiles a list of key events that took place in June 2020.

M&A

1) Saudi Aramco completed the acquisition of a 70% stake in Saudi Basic Industries Corp (SABIC) from the Public Investment Fund (PIF), for the total value of SAR 259.125 billion.

2) National Commercial Bank (NCB) signed a framework agreement with Samba Financial Group for a potential merger.

3) Gulf Union Cooperative Insurance Co. signed a binding merger agreement with Al-Ahlia Insurance Co. to acquire all its shareholders’ issued shares through share swap without any cash payment.  

4) ACWA Power signed a share purchase agreement with Samsung C&T to acquire 4.99% of its shares in Hajr Electricity Production Company (HEPC), the company operating the Qurayyah Independent Power Plant (IPP).

Energy

5) OPEC and other producers agreed to extend the current oil production till July, following April’s decision to cut output by 9.7 million barrels per day in May and June.

6) Meanwhile, energy Minister Prince Abdulaziz bin Salman said the Kingdom and Gulf allies will not extend voluntary oil output cuts until July, as they were for June only.

IPO

7) The Capital Market Authority (CMA) approved the listing of a 20% stake, or 22.86 million shares of BinDawood Holding Company.

8) The CMA approved the first direct listing of Saudi White Cement Company on the Nomu Parallel Market.

Global competitiveness

9) Saudi Arabia moved up to the 24th position as the most competitive economy, in the World Competitiveness Yearbook 2020, published by the International Institute for Management Development (IMD).

COVID-19 Measures
 

10) Saudi Arabia lifted on June 21 the nationwide curfew, whereby all economic and commercial activities resumed, while Umrah visits, international flights, as well as land and sea border crossings remained suspended until further notice.

11) A very limited number of pilgrims from different nationalities residing in the Kingdom will be allowed to perform Hajj this year, taking into consideration health and safety measures.

COVID-19 Initiatives  

12) The General Authority of Zakat and Tax (GAZT) announced new dates for submitting the monthly value-added tax (VAT) returns.

13) The Council of Cooperative Health Insurance (CCHI) launched an initiative to support and empower the beneficiaries of the insurance segment.

14) The Saudi Industrial Development Fund (SIDF) launched initiatives worth SAR 3.7 billion to support the private sector’s industrial enterprises.

Commercial activities resumption 
 

15) Lazurde Company for Jewelry (Lazurde), Arabian Centres, Fawaz Abdulaziz Alhokair & Co., Alandalus Property Co. and Leejam Sports (Fitness Time) resumed operations at all respective retail stores, malls, commercial centers and fitness centers according to pre-curfew normal working hours.

16) Electrical Industries Co. and Saudi Paper Manufacturing Co. resumed complete operations at their factories, plants and subsidiaries.

17) Saudi Arabian Airlines (Saudia) resumed flights to 13 domestic destinations. 

18)  Also, AlAhli REIT Fund 1’s Alandalus Mall and Swicorp Wabel REIT Fund’s shopping centers gradually opened for business.

Royal Initiative
 

19) King Salman approved a number of decisions taken by the Saudi Health Council (SHC), including adoption of the national plan to develop quality patient safety in healthcare sectors.
 

Finance and Markets
 

Q1 2020 positive earnings

A number of listed companies continued to announce their financial results for Q1 2020.
 

20) The companies that posted higher profits include Abdulmohsen Alhokair Group for Tourism and Development, Solidarity Saudi Takaful Co., Middle East Healthcare Co. (Saudi German Hospital), Axa Cooperative Insurance Co., National Gypsum Co., The Mediterranean and Gulf Insurance and Reinsurance Co. (MEDGULF), Al-Etihad Cooperative Insurance Co., Taiba Investments Co., Wafrah for Industry and Development, Arabia Insurance Cooperative Co., Jarir Marketing Co., Saudi Vitrified Clay Pipes Co., Bawan Co., Basic Chemical Industries Co. (BCI), Amlak International for Real Estate Finance, Farm Superstores, Northern Region Cement Co., Mouwasat Medical Services Co., Allied Cooperative Insurance Group (ACIG), Saudi Real Estate Co. (Al Akaria), United Cooperative Assurance Co. (UCA), Gulf Union Cooperative Insurance Co., Saudi Pharmaceutical Industries and Medical Appliances Corp. (SPIMACO), Aljazira Takaful Taawuni Co., Al Hammadi Company for Development and Investment (Al Hammadi), Amana Cooperative Insurance Co., Seera Group Holding, Al Ahsa Development Co., Al Hassan Ghazi Ibrahim Shaker Co., Saudi Industrial Export Co. (SIECO), United International Transportation Co. (Budget Saudi), Al-Baha Investment and Development Co., National Industrialization Co. (Tasnee), and Al Gassim Investment Holding Co. (GACO).
 

Lower profits

21) The companies that recorded lower profits or losses include Alahli Takaful Co., Saudi Industrial Development Co. (SIDC), National Gas and Industrialization Co. (GASCO), Saudi Chemical Co., Red Sea International Co., Knowledge Economic City, Walaa Cooperative Insurance Co., Alinma Tokio Marine Co., Wataniya Insurance Co., Saudi Enaya Cooperative Insurance Co., Saudi Arabian Cooperative Insurance Co. (SAICO), Tourism Enterprise Co. (Shams), Dar Al-Arkan Real Estate Development Co., Al Alamiya for Cooperative Insurance Co., Chubb Arabia Cooperative Insurance Co., Allianz Saudi Fransi Cooperative Insurance Co., Makkah Construction and Development Co., Emaar The Economic City (Emaar EC), Development Works Food Co., Al Ahlia Insurance Co., Gulf General Cooperative Insurance Co., Tihama Advertising and Public Relations Co. (Tihama), Al Sagr Cooperative Insurance Co., BATIC Investments and Logistics Co., Arabian Pipes Co., National Metal Manufacturing and Casting Co. (Maadaniyah), Saudi Fisheries Co. (Alasmak), Saudi Cable Co., Salama Cooperative Insurance Co., Raydan Food Co., Jabal Omar Development Co., Arabian Centres Co., Methanol Chemicals Co. (Chemanol), and Kingdom Holding Co.
 

Cash dividends
 

22) A number of companies and REITs recommended or distributed dividend for H1 and H2 2019, FY2019, Q1 2020 and FY2020, which include Yanbu Cement Co., Saudi Electricity Co., Saudi Pharmaceutical Industries and Medical Appliances Co. (SPIMACO), Al-Samaani Factory For Metal Industries Co., Dr. Sulaiman Al Habib Medical Group, AlAbdullatif Industrial Investment Co., Advanced, Budget Saudi, Saudia Dairy and Foodstuff Co. (SADAFCO), and SASCO.
 

Dividend freeze
 

23) On the other hand, Middle East Paper Co., Saudi Ground Services Co., Basic Chemical Industries Co., Al-Etihad Cooperative Insurance Co., Lazurde Company for Jewelry (Lazurde), Buruj Cooperative Insurance Co., and Al Alamiya for Cooperative Insurance Co. recommended withholding dividend distribution for Q4 2019 , H2 2019 and FY2019,
 

Appointments & resignations

24) Some companies elected new boards and announced appointments and resignations to their boards and executive management teams, including Al Sagr Cooperative Insurance Co., AlAhli Takaful Co., Chemanol, Salama Cooperative Insurance Co., MEDGULF, Alujain Holding Corporation, Saudi Paper Manufacturing Co., SABIC, Maadaniyah, Al-Omran Industrial Trading Co., and Saudi Aramco.

Sukuk
 

25) NCB started the issuance of SAR denominated additional Tier 1 sukuk through private placement to target sophisticated investors defined in Article (9) of the Rules on the Offer of Securities and Continuing Obligations.

26) Arabian Aramco Total Services Company (SATORP) partially redeemed sukuk, amounting to SAR 138.75 million, representing 3.7% of the original face value.

Capital hike
 

27) Al Moammar Information Systems Co.’s shareholders approved a SAR 40 million capital hike to SAR 200 million from SAR 160 million to boost company resources and record high growth rates in the coming years.
 

Tadawul
 

28) The second and final tranche of the fifth phase of Saudi Arabia's inclusion in FTSE Russell Secondary Emerging Markets (EM) Index began on June 22.

29) The market capitalization of Tadawul grew 4.02% month-on-month (MoM) to SAR 8.327 trillion in May 2020.

30) Tadawul activated cancellation of all outstanding orders in the event of a corporate action resulting in a security price adjustment (capital hike or capital cut).

31) Tadawul announced the listing and trading units of AlBilad Gold ETF as an Exchange Traded Fund (ETF) under the symbol 9405.
 

Economy & Investment
 

32)The Saudi Arabian Monetary Authority (SAMA) injected SAR 50 billion into the banking sector to boost liquidity and enhance lending capacity for the private sector.

33) Saudi Arabia’s general reserves increased by SAR 21.9 million MoM to SAR 469.6 billion in April 2020.

34) Saudi Arabia’s trade balance surplus dropped by 38% YoY to SAR 73.7 billion in Q1 2020.

35) The total value of assets held by investment funds in Saudi Arabia edged down by 0.2% YoY to SAR 348.8 billion in Q1 2020.
 

Banking
 

36) Saudi banks’ investments in treasury bonds increased by SAR 5 billion to SAR 413.1 billion in April 2020.

37) Mortgage loans provided to retail and corporate clients by commercial banks in Saudi Arabia increased by 33% YoY to SAR 329.3 billion in Q1 2020.

38) Saudi banks’ credit provisions increased by 96% YoY to SAR 3.32 billion in Q1 2020, compared to SAR 1.69 billion a year earlier.

 

Tourism
 

39) Saudi Arabia approved the Tourism Development Fund, with an initial capital investment of SAR 15 billion ($4 billion), to boost tourism through supporting related investments and developing targeted touristic sites. 

Agreements

40) PIF signed a definitive agreement to acquire a 2.32% stake in India’s Jio Platforms, a wholly-owned subsidiary of Reliance Industries, for nearly $1.5 billion.

41) Walaa Cooperative Insurance Co. signed an insurance agreement with Arab National Bank to provide insurance coverage on the property program and group life.

42) Saudi Cable Co. signed a credit facility rescheduling agreement with its last commercial lender, Al Rajhi Bank, for a value of SAR 264.2 million.

43) Al-Babtain Power & Telecommunication Co. signed the final sale and purchase agreement as well as the shareholders' agreement to sell 49% of Al-Babtain France to Portuguese Metalogalva for SAR 12.5 million.

44) Jazan Energy and Development Co. (JAZADCO) signed an agreement to acquire an 80% stake in Fish Day Co., the owner and operator of the Fish Day portal, offering fresh fish home delivery services.

45) Saudi Arabian Mining Company (Maaden) subsidiary, Ma’aden Wa’ad Al Shamal Phosphate Co. (MWSPC), signed two agreements to reschedule and refinance its debts.

Contracts
 

46) Al-Samaani Factory for Metal Industries Co. signed a three-year logistics contract with National Aquaculture Group (NAQUA) for a total value of SAR 33.46 million.

47) The Red Sea Development Company (TRSDC), the developer behind one of Saudi Arabia’s ambitious tourism projects, awarded a contract to International SOS for the provision of medical services during the initial construction phase of the development.

48) Saudi Arabia’s uber-luxury destination, Amaala, awarded the construction supervision contract to Saudi Arabian Parsons Ltd. (Parsons) for Phase I of Triple Bay project.
 

E-commerce

49) Amazon launched Amazon.sa, a dedicated store for customers in Saudi Arabia, featuring millions of products across 34 product categories such as electronics, apparel, home and kitchen, and groceries.