GrowthGate, the GCC-based specialist buyout firm, has reached a deal to acquire 20 per cent of Arabian Roots Group, a Saudi-based building materials conglomerate, and will separately acquire additional equity interests in this conglomerate’s retail division.

Arabian Roots is a privately-held Saudi corporation with sales of circa SR700 million ($186.7 million) and expected profits of SR37 million ($9.8 million) for the fiscal year 2008. The value of the transaction was not disclosed.

Arabian Roots is a leading wholesaler, manufacturer, retailer and special service provider in the Saudi market, focusing on building materials.

The product range includes metal works, fences, doors, railings, grids, false ceiling supports, adhesives, paints, coatings, waterproofing membranes, power tools, electric generators, and mobile cranes.

Arabian Roots has a well-developed regional distribution and marketing network and outlets across Saudi, UAE and more recently Qatar besides the Egypt, Syria and Lebanon and a presence in Malaysia.

Arabian Roots was founded in 1981 and restructured around the wholesale, manufacturing, contracting and retail divisions by the new management under the leadership of Ousama Fansa its CEO in 2004.

The shareholders’ base comprises prominent Saudi businessmen with deep-rooted experience and extensive holdings in the construction sector throughout the Middle East.

“GrowthGate and Arabian Roots are committed, in the near future, to expand the footprint of Arabian Roots throughout the Mena region with an emphasis on the GCC and other key markets," said company CEO Ousam Fansa.

The agreement will help broaden the business holdings and the products mix essentially via acquisitions of enterprises that are engaged in the building materials sector, provided that they add strategic depth and economic benefits to Arabian Roots”, Fansa explained.

“The construction boom witnessed in the GCC markets and which is fuelled by the needs for renewed infrastructure, expanding urban centres and newly planned industrial and economic zones will create a sustainable level of demand for building materials for years to come and Arabian Roots is at the heart of such activity with a pole position that is only shared by few other players” he added.

GrowthGate follows a ‘buy and build’ model that focuses on acquiring medium-sized, successful companies with strong management and turning them into regional champions through a series of carefully selected and well-priced acquisitions.

Investments are held for 3 to 5 years prior to being monetized via an exit sale. This deal is the third direct equity investment of GrowthGate since its capitalisation in mid 2007, coming after Able Logistics (logistics & transport) and Gama Aviation (private jet business) and marks the first private equity transaction for GrowthGate in the prized Saudi market.

As per Saudi regulations that govern foreign direct investments in the Kingdom, this transaction is subject to the approval of the Saudi Arabia General Investment Authority.-TradeArabia News Service