The Saudi Arabia-based National Agricultural Development Company (Nadec), of which 20% is owned by the country’s sovereign wealth fund, will buy Al Safi Danone, a subsidiary of multinational food giant Danone.

Nadec will fund the acquisition through a capital raise of SAR536m ($143m).

Upon completion, existing Nadec shareholders will own 61.25% of the company, while Al Safi shareholders will hold the remaining stake.

The purchase is subject to approval by shareholders and regulatory authorities.

Nadec managing director Abdulaziz Al Babtain told The National: “The transaction will allow both companies to better serve customers and realise benefits not available on a standalone basis.

"The transaction will allow both companies to better serve customers and realise benefits not available on a standalone basis."

“It will create a platform for future growth and, importantly, drive significant value creation for shareholders. The transaction will also contribute to the goals of Saudi Arabia’s Vision 2030 by strengthening the private sector.”

Nadec and Al Safi’s competitor is Almarai, which is a leading dairy company in Saudi Arabia and the Arabian Gulf region.

According to Nadec, this purchase will boost its dairy products offerings and also widen its footprint in UAE, Saudi Arabia, Bahrain, Jordan, Kuwait, and Lebanon, as well as gaining access to markets such as Iraq.

The transaction will enable Nadec to strengthen its cash flow and earnings, and reduce costs with regard to farming, manufacturing, supply chain and sourcing, sales and marketing. This will result in new revenue opportunities through a wider distribution network and customer reach.