Arabian Cement has entered into potential merger talks with Al Safwa Cement of Saudi Arabia, owned by El Khayyat Group, Public Pension Authority (PPA) and General Organisation for Social Insurance (GOSI).

Arabian Cement has been attracted by the locational advantage of the plants of both companies and source of raw materials, besides the cost savings in selling, general and administrative expenses and relatively lean inventories, according to Al-Rajhi Capital Research.

In addition, both companies have common ownership with PPA being a stakeholder in both Al Safwa and Arabian Cement (5.27 per cent).

If the merger goes through, it will result in a combined cement production capacity of 9.2Mta and a market share of 15 per cent.

Arabian Cement has a production capacity of 4.8Mta while Safwa has 4.4Mta, Al Rajhi added.