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Steel joint venture buys United Gulf Steel Mill

by Ben Roberts on Sep 26, 2011


GIC CEO Hisham Al Razzuqi.
GIC CEO Hisham Al Razzuqi.

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United Steel Company (SULB) has bought Saudi Arabia’s United Gulf Steel Mill Company, as the major acquisition activity in the metal market across the Middle East continues.

SULB is a 51-49% joint venture between Gulf United Steel Holding Company - a steel producer and investment vehicle owned by Kuwaiti and Qatari investors and also known as Foulath - and Japan’s Yamato Kogyo, a beam and structural steel maker.

United Gulf Steel Mill Company, based in Jubail, is the only manufacturer of medium section structural steel products in the GCC, and has a mill with a capacity of 450,000 MTPA producing beams and channels as well as flat, round and square bars.

Hisham Al-Razzuqi, CEO of Gulf Investee Company, an investment vehicle jointly owned by each of the GCC states and a Foulath shareholder, said: “The acquisition of UGS, with an annual capacity of 450,000 tonnes of light and medium sections and beams, by SULB, emphasises GIC’s main mandate in developing the economy of the region through investments in profitable projects or acquiring companies that are facing difficulties and turn them around to profitable companies.”

The acquisition comes as Saudi Arabia undergoes an industrial revolution to develop manufacturing facilities in metals and other building materials in its industrial cities of Dammam, Jubail and Yanbu as well as southern cities such as Rabigh.

The country is currently seeing a boom in construction activity largely driven by government investment to build thousands of new houses for its citizens along with new economic cities, a financial district in Riyadh, new and refurbished airports and rail systems.

It is also investing heavily in maintenance for its oil production facilities as well as its plants to develop petrochemicals, all of which generate demand for steel and other metals.

Some steel industry veterans predict further acquisition activity in emerging markets. “My view, and that of my company, is that there will be a major acquisition of a western company by an emerging market company in the next 3-5 years,” said Werner Kreuz, vice president of AT Kearney.

“However, the reason for a lot of acquisition will have to change," he told a Steel Business Briefing conference in Dubai yesterday. "When I was a young consultant it was about creating cost synergies. But cost synergies are often the reason why acquisitions fail. There needs to be a compelling story.”
 



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