Saudi Arabia’s PIF buys 23.08% stake in paper company Mepco to diversify portfolio

Sovereign wealth fund's investment in Tadawul-listed company aims to support private sector and encourage local manufacturing

Saudi Arabia's Public Investment Fund acquired a stake in the Tadawul-listed Mepco by increasing capital and subscribing to new shares. AFP
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Saudi Arabia's sovereign wealth fund, the Public Investment Fund, has bought a 23.08 per cent stake in the Middle East Paper Company (Mepco) as the fund continues to expand its portfolio in key sectors of the kingdom's economy.

The PIF acquired the stake in the Tadawul-listed Mepco by increasing capital and subscribing to new shares, it said on its website on Thursday.

The total value of the investment was not disclosed.

Mepco is an integrated paper manufacturer offering products for the packaging, construction and furniture sectors. It supplies the Middle East, Africa, Asia, the Americas and European markets.

The deal, approved by regulators and Mepco’s shareholders, is expected to support the company’s expansion while strengthening its local supply chain for current and future projects, according to the wealth fund.

“PIF’s investment in Mepco reflects the attractive opportunities for growth in promising sectors such as recycling, retail and building materials,” said Muhammad Aldawood, head of the industrials and mining sector in Mena investments at the wealth fund.

The deal was completed following a preliminary agreement between the two entities in May, with Mepco announcing at the time that the PIF planned to subscribe to a significant minority in the company for 31.50 Saudi riyals ($8.40) per share.

“PIF's investment further enables the implementation of our expansion strategy and captures significant growth potential, both locally and regionally," said Sami Al Safran, chief executive of Mepco.

"This will help create new opportunities, as Mepco continues its journey to become a national champion in our industry."

The PIF is at the heart of Riyadh’s economic diversification efforts and holds stakes in public and private companies including Meta and Alphabet.

PIF is empowering 13 priority sectors locally, in partnership with private businesses, contributing to achieving the goals of Vision 2030 by diversifying the economy. These include the retail, construction and real estate sectors, within the framework of PIF’s investment strategy.

The fund was the top investor among global sovereign wealth funds last year and spent $31.6 billion in 49 deals, up 33 per cent compared to 2022, industry specialist Global SWF said in its annual report on Monday.

Last month, it signed an agreement to invest in aviation services company Saudia Technic, a subsidiary of aviation major Saudia Group, to create a national maintenance, repair and overhaul segments "champion," in the aviation sector.

It aims to boost the size of its assets to 4 trillion riyals by 2025 and create 1.8 million jobs, according to Yasir Al Rumayyan, governor of the PIF. The PIF currently has assets worth $700 billion with more than 644,000 indirect and direct jobs created, according to its website.

"The Saudi market provides promising opportunities for investment in paper products and related industries such as tissues due to its rapid growth and the drive for localisation of production," the PIF said.

"Additionally, PIF’s investment in Mepco supports the private sector in Saudi Arabia, boosts local content, increases high-value ready-for-market exports, and improves quality and competitiveness."

Updated: January 04, 2024, 10:36 AM