Jouf Cement to raise $173m from IPO

17/07/2010 00:00 AST

Al Jouf Cement plans to raise SR650 million ($173.3 million) by selling new and existing shares to the Saudi public, with over half of the proceeds going to the founders of the firm which started operations in May.

Over the July 19-25 period, Al Jouf will offer Saudi investors 27.9 million new shares and 37.1 million existing shares at SR10 each to raise the total number of its shares to 130 million, the listing prospectus showed.

About 55.5 per cent of the IPOs proceeds will go to founding shareholders who include at least one member of the Saudi royal family and other investors such as KSB Capital Group, which is also acting as the financial adviser for the listing along with state-run National Commercial Bank (NCB).

Ibrahim al-Alwan, a senior KSB executive, said KSBs stake would fall to 6 per cent from 12 per cent after the IPO.

The remainder of the proceeds will repay a bridge loan that was taken to fund the capital expenditure and start works on the plant so that production does not get delayed. The production started around the month of May, Alwan told Reuters.

The listing prospectus showed Al Jouf will use SR171.5 million of the proceeds to repay debt and SR100 million to repay unspecified general costs.

In 2009, the firm obtained a 220 million riyal Islamic loan from NCB to mainly fund its working capital and signed this year an agreement with state-owned Saudi Industrial Development Fund for a financing worth up to SR483.5 million to be repaid over 14 instalments in eight years, it said in the prospectus.

Al Jouf has a production capacity of 1.75 million tonnes per year -- or 5,000 tonnes per day -- and would compete with Tabuk Cement and new entrant Northern Region Cement Co, Alwan said.

Al Jouf Cement will tap demand from regional markets, such as Iraq which is undergoing a huge reconstruction effort. It has already obtained cement exportation licences, he said.

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