Saudi Arabia completes first phase of flour mills privatisation

The final stage, which will see the sale of two remaining mills, is expected to conclude by next year

Saudi Arabia is the biggest flour market in the Mena region. The kingdom is pressing on with its privatisation drive as part of its economic diversification plans. Bloomberg

Saudi Arabia completed the first batch of its flour milling sector privatisation through a full divestment of two of its four milling companies to qualified investors.

The First Milling Company went to Raha AlSafi consortium for 2.02 billion Saudi riyals (Dh1.98bn), whereas the Third Milling Company was awarded to Alrajhi-Ghurair-Masafi consortium for 750 million riyals.

Winning bidders were decided on the basis of the "highest financial bids submitted by qualified strategic investors", the National Centre for Privatisation and Saudi Grains Organisation (Sago) said in a statement.

The completion of the sale and transfer of ownership is subject to the fulfilment of legal requirements by the bidders.

“The successful award of sale of the milling companies in the first batch reflects the attractiveness of Saudi Arabia's flour sector to investors … the qualification phase for the second and final stage of the privatisation of flour milling sector will be launched shortly,” it added.

The second phase will include the sale of the second and fourth milling companies.

The four flour-milling companies under Sago represent an “attractive opportunity” for the private sector to invest in one of the largest flour markets in the Middle East and North Africa with “high growth rates” and potential to enhance “sector productivity”, NCP said.

Sago is the state entity running a portfolio of flour mills and animal feed factories in the kingdom.

Last month, the kingdom issued a resolution giving four milling companies permits to produce flour and transferring their ownership to the NCP. This was in line with NCP’s role to oversee sales of public assets and forge public-private partnerships.

NCP said the transfer of ownership will not impact the ongoing privatisation that is expected to be finalised by next year.

The privatisation of the flour-milling sector is among industries including mining, health and education marked by Riyadh for privatisation under the Vision 2030 programme, which aims to diversify the kingdom's economy and reduce its dependence on oil.

The privatisation of Sago, identified among the very first government-controlled enterprises as part of Saudi Arabia's privatisation programme, received interest from international agricultural firms such as US-based Archer Daniels Midland and fellow American firm Bunge, according to Reuters.

HSBC Saudi Arabia is acting as the sole financial adviser on the privatisation.