R14bn Saudi Denel of­fer

The Citizen (Gauteng) - - NEWS -

Saudi Ara­bia has made a $1 bil­lion (about R14 bil­lion) bid for a broad part­ner­ship with state-owned de­fence group Denel that would in­clude ac­qui­si­tion of a mi­nor­ity stake in a joint ven­ture with Ger­many’s Rhein­metall, a source fa­mil­iar with the of­fer said.

Cur­rently heav­ily de­pen­dent on im­ports, Saudi Ara­bia – the world’s third-largest de­fence spender – is seek­ing part­ner­ships to de­velop its own de­fence in­dus­try with the goal of lo­cal­is­ing half of its mil­i­tary spend­ing by 2030.

Saudi Ara­bian Mil­i­tary In­dus­tries (Sami), the king­dom’s state de­fence com­pany, told Reuters last month that it was in dis­cus­sions with ma­jor South African firms and aimed to con­clude the first deals by the end of the year.

Ac­cord­ing to the source, who asked not to be named due to the sen­si­tiv­ity of the talks, Saudi Ara­bia was tar­get­ing Denel’s 49% stake in Rhein­metall Denel Mu­ni­tion (RDM).

RDM is a South African-based joint ven­ture formed in 2008 be­tween Denel and Rhein­metall Waffe Mu­ni­tion GmbH, which holds the re­main­ing 51% stake. It spe­cialises in the de­vel­op­ment, de­sign and man­u­fac­ture of medium and large-cal­i­bre am­mu­ni­tion, in­clud­ing ar­tillery shells.

A Rhein­metall spokesman de­clined to com­ment. The Ger­man govern­ment is cur­rently re­view­ing all arms sales to Saudi Ara­bia.

In­dus­try sources said RDM op­er­ates in­de­pen­dently and is sub­ject to South African law, which means ex­ports from the unit are not sub­ject to Ger­man govern­ment over­sight. Sources said they did not ex­pect a change in own­er­ship would re­quire a Ger­man govern­ment re­view.

Un­der the Saudi of­fer, Sami would also fi­nance re­search and de­vel­op­ment in other Denel di­vi­sions, in­clud­ing Denel Dy­nam­ics, which pro­duces tac­ti­cal mis­siles and pre­ci­sion guided weapons.

Denel and Sami would share in­tel­lec­tual prop­erty and un­der a new joint ven­ture would tar­get de­fence ex­port mar­kets in the Mid­dle East and North Africa.

Fi­nally, Saudi Ara­bia – al­ready a top Denel cus­tomer for mil­i­tary ve­hi­cles, ar­tillery mu­ni­tions and radar equip­ment – would pur­chase a cer­tain amount of the group’s pro­duc­tion.

The Saudis ex­pect an an­swer by the end of De­cem­ber.

“As our dis­cus­sions are not fi­nalised yet, we can­not pro­vide any com­ment,” Sami chief ex­ec­u­tive An­dreas Sch­wer wrote in re­sponse to Reuters’ ques­tions.

Pres­i­dent Cyril Ramaphosa last week said Denel was “ripe for joint-ven­ture part­ner­ships”, but that the govern­ment had not yet weighed the Saudi bid or pro­pos­als from what he said were a num­ber of other suit­ors.

A Denel spokesper­son would not com­ment, say­ing such ne­go­ti­a­tions take place on a state-tostate ba­sis.

Ramaphosa’s spokesper­son, Khusela Diko, said the pres­i­dent would make a de­ci­sion once it was dis­cussed by Cabi­net. – Reuters

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