Almarai, ADM ‘preparing bid’ for Saudi milling monopoly sell-off

According to Reuters, the Saudi dairy major will join American agribusiness giant Archer Daniels Midland in partnership to tender for the business.

It reported that Italian wheat supplier Casillo and a partnership of Turkey’s TAV construction group and Saudi builder Al Rajhi Holdings were also considering bids when the state-owned grains company sells off its milling operations later this year.

Citing sources, the news wire said a likely price for the transaction was not yet know. Assessing a bid amount would be difficult for the suitors as the business has never been run for a profit, it added.

Saudi Grains (Sago), one of the world’s biggest wheat and barley buyers, aims to divest various elements of its business as part of the government’s “Vision 2030​” reform plan to diversify the kingdom’s economy in a bid to reduce its dependence on oil.

Sago will also spin off three other of its operations at the same time. Once all businesses are floated, the erstwhile parent will operate as an industry regulator.

It is likely that a pre-qualification process for the bidders will begin in autumn. Reuters’ sources suggested that Riyadh is keen for a foreign firm to enter the local market to bring international expertise to the grains segment.

None of the parties named by Reuters have commented on the speculation.

Sago operates 12 mills with a combined capacity of 14,000 tonnes per day, with plans for two more by 2025.

As a major importer of grains since 2008, when it abandoned plans for self-sufficiency from desert wheat and barley farms, Saudi hopes the sell-off will expand the amount of storage available in the country for grains.

It currently imports some 3.5m tonnes a year, though this is expected to grow by a further 1m tonnes by 2025, due to population growth.