Saudi Arabia's National Agricultural Development Co., or Nadec, will acquire Danone's venture in the country to form one of the kingdom's largest dairy producers, Bloomberg News reported, citing a March 25 statement to the Saudi Stock Exchange (Tadawul).
Nadec said it will fund the acquisition of privately held Al Safi Danone Ltd through a capital increase of 536 million riyals. After the deal's completion, existing Nadec shareholders will own 61.25% of the company, and Al Safi shareholders will hold 38.75%, Bloomberg said.
"The transaction will allow both companies to better serve customers and realize benefits not available on a standalone basis. ... It will create a platform for future growth and, importantly, drive significant value creation for shareholders," Bloomberg quoted Abdulaziz Al Babtain, managing director of Nadec, as saying in a statement.
Nadec shares rose as much as 8.4% to 40.70 riyals, and finished 4.90% higher at 39.38 riyals, its highest since September 2014, the newswire said.
Nadec, which is 20% owned by the Saudi Public Investment Fund, was advised by Morgan Stanley. Al Safi was advised by Goldman Sachs.
Nadec's acquisition comes amid rising M&A activity in Saudi Arabia as slower economic growth pushes companies to combine to save costs and as new takeover rules make it easier to complete deals, Bloomberg reported.
Sahara Petrochemicals Company and Saudi International Petrochemical Company said they were evaluating a merger earlier this month. Saudi British Bank and Alawwal Bank are also in talks to merge, as are hospital operators Al Hammadi Company For Development and Investment and National Medical Care Company, Bloomberg said.
As of March 23, US$1 was equivalent to 3.75 Saudi Arabian riyals.