US agribusiness giant Cargill has formed a joint venture with Saudia Arabian food producer Arasco for the creation of starches and sweeteners in the country.
The joint venture company will acquire Arasco's existing corn milling facility in Al Kharj and will produce starch based products primarily for the Gulf Cooperation Council countries of Saudi Arabia, UAE, Kuwait, Oman, Qatar, Bahrain, as well as Yemen, Iraq and Jordan.
The deal marks Cargill's first move into the Kingdom and will build on its global capabilities in food ingredients and Arasco's existing knowledge and supply chain infrastructure in the country, Cargill said.
Cargill will hold a 20% stake in the joint venture, with Arasco taking the remaining share and management control.
The deal is the second for Cargill this month. Last week the company announced it had secured a deal to acquire two animal feed mills from the bankrupt Pennfield Corporation in the US for US$9.8m.
Cargill and Arasco to create starches and sweeteners joint venture in the Kingdom of Saudi Arabia
Cobham, United Kingdom - 23 January 2013 Cargill and Arasco have announced today their intention to create a new starches and sweeteners joint venture in the Kingdom of Saudi Arabia. The new joint venture company will acquire Arasco's existing corn milling facility in Al Kharj and will produce starch based products primarily for the Gulf Cooperation Council (GCC) countries of Saudi Arabia, UAE, Kuwait, Oman, Qatar, Bahrain, as well as Yemen, Iraq and Jordan.
This joint venture will mark Cargill's first operations in the Kingdom and will build on Cargill's global capabilities in food ingredients and Arasco's already proven successful local knowledge and supply chain infrastructure.
Speaking about the importance of this new geography and growing industry, Frank van Lierde, Executive Vice President, Cargill said, "The Middle East region represents the highest growth area for the food and drink industry in the world. The rapidly changing demographics in the region and the growth of consumer choice means that this joint venture will be well placed to help our customers meet this rapidly developing market."
"By partnering with Arasco and combining the strengths of both our companies, this joint venture will not only help us create enhanced solutions for our customers but most importantly local solutions," continued van Lierde.
The intent is to triple production at the Al Kharj plant to meet the growing demand across the confectionery, juice, bakery and catering segments in the region.
Glucose and starch production capacities will more than double and the product offering will be expanded to include high fructose corn syrup (HFCS) to serve the growing food and beverage industry in the Kingdom of Saudi Arabia.
"This is an exciting opportunity for both companies to offer our customers - new or existing - a broader portfolio of products and solutions," said Dr Abdulmalik Alhusseini, Chief Executive Officer, Arasco. "Through this joint venture, we can expand our facilities more quickly and launch new products, such as HFCS to the Kingdom of Saudi Arabia. We are looking forward to working with Cargill to build and strengthen our existing successful corn milling operations in the Kingdom."
Going forward, the joint venture will also pave the way for discovering further opportunities for growth in the region and to support customers with other food ingredient solutions. The joint venture has potential for further expansion in line with customer demand.
Once the agreement is finalised, Cargill will take a 20 percent stake in the joint venture, while Arasco will take a 80 percent stake and management control. The agreement is subject to regulatory approvals.
