Saudi Arabia’s Public Investment Fund’s (PIF) investment in Kingdom Holding Co. (KHC) is part of Crown Prince Mohammed bin Salman’s Vision 2030, Arun Leslie John, Chief Market Analyst, Century Financial, told TRENDS.
“The move aims to overhaul the structure of the country’s economy by reducing the high dependence on oil by transforming how the Kingdom generates income by diversifying to myriad industries,” said John.
On May 19, KHC announced that major shareholder and founder, Prince Alwaleed bin Talal, signed an agreement with the PIF to sell 625 million shares, representing 16.87 percent of the company’s share capital.
On March 22, PIF acquired 625 million shares for a total value of SAR 5.6 billion ($1.5 billion), made through a private sale and purchase transaction at SAR 9.09 each.
Prince Alwaleed continues to hold the remaining 78.13 percent in KHC.
John believes that further investments into the KHC could be possible as the Saudi government is identifying various investment avenues that will help the economy to restructure its core income generation.
Investors will find KHC stock attractive considering a huge stake has been acquired by the Saudi’s sovereign wealth find, providing confidence in the company’s future performance, he stated.
When asked about the move leading to any changes in Prince Alwaleed and KHC’s future plan, John said its future plans would be more closely aligned with its core mission and vision to be a more efficient, profitable, and dynamic private sector after PIF’s stake acquisition.
“This will shape and drive a more streamlined business environment across the Kingdom while stimulating investment and entrepreneurial activity.”
Further investments into the Kingdom Holding Company is possible as the Saudi government is identifying various investment avenues that will help the economy to restructure its core income generation.
In addition, the move is evidence of the government’s efforts to foster closer participation between the private sector and government, which demonstrates flexibility, proactiveness and willingness to acquire companies with superior management competence, such as KHC.
This can improve the asset management capabilities of PIF and be on the path to fulfill Vision 2030, he added.
The PIF, which manages over $600 billion in assets, is at the center of Mohammed bin Salman’s ambitious agenda to diversify the Gulf country’s economy away from oil.
A recent report by SWF Institute revealed that PIF had advanced to the sixth position among the world’s largest sovereign wealth funds in February, with assets surging by $100 billion to $580 billion this month, compared with $480 billion in 2021.
In February, Crown Prince Mohammed bin Salman announced that 4 percent of Saudi Aramco’s shares were transferred to the PIF in line with the Kingdom’s long-term strategy to support the restructuring of the national economy.
The move also supports the fund’s plans to raise assets under management (AUMs) to nearly SAR 4 trillion by 2025.
According to the Securities and Exchange Commission’s recent data, the fund reduced its holding of US equities by $ billion quarter-over-quarter to $43.6 billion in Q1 2022.
The fund raised stake in four companies – Take-Two Interactive, PayPal, Alibaba, and Farfetch Ltd.