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Saudi foreign land buying spree article.

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    Saudi foreign land buying spree article.

    Anyone see this article on agrimoney?

    Seems like the Saudis are investing to secure their food supplies.

    Do you guys think we will see more of this in the future? Foreign competition for land and markets?



    Saudi extends foreign land spree with CFG takeover

    Saudi Arabia, the desert kingdom increasingly reliant on food imports, extended its drive to build farming operations abroad by buying Continental Farmers Group at a hefty premium.

    A consortium of Saudi groups - comprising dairy giant Almarai, grain importer Al Rajhi and Salic, the agriculture arm of the country's Public Investment Fund sovereign wealth fund – agreed to pay £0.36 a share for Continental Farmers Group, valuing the farmer in Poland and Ukraine at nearly £60m.

    The shares closed in London on Wednesday at £0.24.

    The acquisition is the latest in a series of foreign deals by Saudi Arabian investors which, according to an official estimate late last year, have spent about 40bn riyals ($11bn) on agriculture projects in Argentina, Brazil, Canada, Sudan and Ukraine.

    The shift abroad comes against a backdrop of rapid population growth, at a time when the Saudi government is, to save water, phasing out support for much domestic agriculture - including production of wheat, a key crop for a country in which bread is a staple food.

    String of investments

    Indeed, Fahd Balghunaim, the Saudi agriculture minister, last month urged investment in agriculture to boost food security, terming it "one of the lucrative areas for investments because there is growing demand for food".

    "We expect more investments in the near future," he said, flagging the potential for support from Salic.

    Al Rajhi – founded by Suleiman Al-Rajhi, the 93-year old banking billionaire rated as by Forbes as the fourth richest person in Saudi Arabia – is already a large investor in Ukraine agriculture.

    Konstantin Grishchenko, then Ukraine's foreign minister, met Mr Al-Rajhi two years ago on a trip to Ukraine to discuss potential investment.

    Almarai, the world's biggest integrated dairy group, including both milk production and processing operations, in 2011 paid $83m for 12,000-hectare Argentine farm operator Fondomonte, which now provides feed for the Saudi group's dairy herd.

    Khalid Al Malahy, director of the investment consortium, named United Farmers Holding Company, said the venture's aim was "to make long-term investments in the agricultural sector, with the principal objective of developing sustainable sources of food grain and fodder on a global scale".

    Land portfolio

    With Continental Farmers Group, founded 19 years ago, the consortium will in Poland gain ownership of 1,600 hectares of farmland, and leases on a further 1,100 hectares.

    In Ukraine, Continental Farmers Group has leased 33,000 hectares of land in the fertile black earth region in the west of the country, although nearly 10,000 of that land has yet to be registered with authorities.

    The consortium offered investors in the farm operator the chance to gain up to £0.37 per share, dependent on success in registering this farmland.

    Continental Farmers Group aims to have 50,000 hectares under crops by 2015, and said that, in planting 19,600 hectares of winter cereals for this year's harvest, it was running ahead of plan.

    Profits fall

    The offer - which has been accepted by the Continental Farmers board, and been accepted by holders of 9.8% of the company's shares so far - comes less than two years after Continental Farmers Group floated, with a placement price of £0.2314.

    Separately, the group unveiled earnings down 79% at E644m for last year, despite a 23% rise to $30.7m in revenues.

    The decreased profit reflected factors including larger tax payments, the cost of expanding its operations, and a rise of E1m in annual land rentals thanks to a change in land valuation changes.

    The company said it "met its internal budget for ebitda", earnings before interest, taxation, depreciation and amortisation, which rose 9.1% to E7.29m.

    Continental Farmers Group shares soared 48% to the £0.36 offer price in morning deals.
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