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Bawan closes $51m deal for Saudi Arabia plastic supplier Arnon

Loss-making Bawan expects acquisition to expand its product portfolio and boost profitability after 2018 revenue drop of 8%

Bawan supplies materials such as metal to Saudi's construction market.
Bawan supplies materials such as metal to Saudi's construction market.

Riyadh-based building materials supplier Bawan has secured regulatory approval for its acquisition of Saudi Arabian fabrication firm Arnon Plastic Industries Company in a move that opens up a new market for the loss-making company.

Bawan reached an agreement to acquire all 450,000 shares and buy Arnon Plastic outright in January 2019, but had not obtained the regulatory approvals to close the deal until now, according to a filing on the Saudi bourse, Tadawul.

Arnon Plastic manufactures polyethylene and polystyrene insulation and panelling products that are used by numerous building contractors in the kingdom. Its $50.9m (SAR191m) takeover by Bawan has been described as a “major acquisition” for the building materials supplier.

The takeover opens up a new market for Bawan, which hitherto only supplied wood, metal, and electrical products for substations and power transformers, as well as concrete.

Diversifying into the plastics sector is part of Bawan’s strategy to mix up its portfolio and ensure it can supply its customers with a wider range of products. This could help it increase sales and boost its bottom-line at a time when many companies are feeling a squeeze in the Middle East market.

Bawan has been stung by the intensely competitive business landscape, and posted a loss of approximately $123,000 (SAR464,000) last year.

Due to rising competition and weaker sales, the company’s revenue dropped by 8% between 2017 and 2018, according to its 12-month financial results.

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Construction Week - Issue 761
Mar 21, 2020