Middle East Paper Company (MEPCO), an integrated paper manufacturer offering products for the packaging, construction, and furniture sectors, has announced plans for expansion. The company had, around four months ago, shown interest in investing approximately 1.5 billion riyals on a fifth production line to increase output.
The company also pointed at investment opportunities in waste management. Saudi Arabia’s announcement of a strategy to revitalize the sector of waste management has further bolstered MEPCO and its subsidiaries of having the best opportunity to develop and benefit from the plan.
Sami Safran, Group President at MEPCO, says, “As MEPCO is keen on financing these projects, the company decided to raise its capital by distributing free bonus shares, in addition to entering the Public Investment Fund (PIF) as strategic investor by signing a non-binding memorandum of understanding (MoU) with PIF.” The MoU signed on 7 May, 2023, has let PIF acquire a “significant” minority stake in MEPCO.
The Jeddah-based company said in a regulatory filing on Saudi Stock Exchange, Tadawul, that PIF will subscribe to MEPCO’s newly issued shares at 31.50 riyals per share, subject to obtaining the Capital Market Authority (CMA) and other regulatory approvals. MEPCO further stated that the initial pact with PIF is “not binding” and will expire on 31 July, 2023, or “upon concluding a legally-binding subscription agreement between MEPCO and PIF, whichever is earlier.”
Commenting on the 7% decrease in MEPCO’s share price against the market price at the time of conclusion of the agreement, Safran says, “These agreements were not concluded overnight, but were reached on the basis of market indicators for measuring and setting the price. The deal price was very close to the existing market price at that time, but after the announcement, the stock witnessed changes.”
He stated that MEPCO is one of the companies that has promising investment opportunities in line with Saudi Arabia’s plans and focus on economic diversification. “The company is a magnet for many local and foreign investors to take advantage of the environmental changes that occur in investments.”
MEPCO’s chief said that he expects an agreement would be reached with PIF within the next two months, and any changes that may occur would be officially announced.
Safran said that 2022 was an exceptional year for the global paper industry with paper prices skyrocketing to historical levels. He added that even though paper prices are currently witnessing a corrective move, there is a global decline in factory operating rates and demand for paper. “MEPCO, however, has succeeded in taking advantage of the opportunities that came by, and is today witnessing sales growth.”