Saudi Arabia's Nadec abandons plan to acquire rival Al Safi Danone

Nadec cited change in 'market dynamics' as reason for cancelling the deal

Saudi Arabia’s National Agricultural Development Company, a unit of the sovereign wealth fund, dropped its bid to acquire a food and beverage rival, which could have created one of the biggest dairy producers in the country.

Nadec, as the company is known, said it is abandoning plans to buy Al Safi Danone, jointly held by Al Safi Holding and Danone Dairy Investments Indonesia, in a statement to the Saudi Stock Exchange, where its shares trade.

Last year, Nadec, in which the Public Investment Fund holds a 20 per cent stake, said it signed a share purchase agreement with Al Safi Holding to acquire 100 per cent of Al Safi Danone. The deal was to be funded through a 536 million Saudi riyal (Dh525m) increase to its capital, which would have inflated by 63 per cent to 1.38 billion riyals.

However, “in light of changes to market dynamics since the execution of the agreement, the board of Nadec and Al Safi Danone shareholders have concluded that the transaction as previously contemplated is no longer in their best interests”, Nadec said on Sunday.

The companies have “agreed to mutual termination” of the share purchase agreement in accordance with the terms and conditions.

Both Nadec and Al Safi compete with Saudi Arabia's Almarai, the Arabian Gulf’s largest dairy company. Nadec last year cited a rise in dairy products and a larger footprint in Saudi Arabia, the UAE, Kuwait, Bahrain, Jordan and Lebanon markets as main drivers behind its bid to acquire the rival company.

Nadec said its current position in the market will enable it to continue to drive growth and it will “now focus on the execution of its standalone corporate strategy”.

The plan to abandon the deal comes despite a rise in merger and acquisition activity in Saudi Arabia. Deals valued at more than $12 billion were announced in the kingdom last year, the highest in the past decade, according to data compiled by Bloomberg.

However, the consumer retail sector in the kingdom has slowed in the past few quarters because of slower economic growth, which has driven the consolidations among companies.

Updated: June 23, 2019 03:53 PM

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