MESC eyes takeover of Saudi-Australian JV

Monday, Oct 05, 2009

Saudi Arabia-based Middle East Specialized Cables Co 2370.SE (MESC) said it would seek approval for a capital hike to finance the takeover of United Transformers Electric Co (UTEC).

UTEC, an unlisted local firm, is a joint venture between Al-Fozan group and Australia's Wilson Transformer Company.

MESC signed an initial agreement with UTEC on Sunday setting a June 30 target for the completion of the takeover, MESC said in a statement posted on the bourse's website late on Sunday.

"Each of the two companies is going to appoint a financial adviser to evaluate this takeover," MESC said.

The firm will "seek the necessary approvals from its owners, official parties and an assembly to raise capital for the purpose of owning UTEC shares", it added.

UTEC, established in 2001, produces 15,000 transformers a year and claims a 25 percent local market share. State-owned utility Saudi Electricity 5110.SE is UTEC's main customer.

Export-oriented MESC generated sales of 1.31 billion riyals ($349 million) in 2008 and made a net profit of 88.4 million riyals in the same period.

Through expansion in Saudi Arabia, Jordan and the United Arab Emirates, MESC wants to raise sales 3 billion riyals and net profit to 300 million riyals by the end of 2010, according to its 2008 annual report.

A sharp decline in copper prices MCU3 hit the value of its inventories in 2008 and led to a 41 percent drop in net profit compared with 2007.

MESC raised 441.6 million riyals from selling 30 percent of its capital at 46 riyals per share in 2007. Since it started trading, MESC shares have lost 6.5 percent against a 36.6 percent fall in the Saudi all-share index .TASI.

 

Source: Reuters