Saudi Grains Organization (SAGO) is looking to sell a stake to a strategic buyer as part of its privatization for which HSBC's Saudi Arabian arm has been chosen as its advisor, sources aware of the matter said. The agency in charge of the kingdom's extensive wheat-buying program is one of the first to appoint an advisor as the kingdom eyes the privatization of a host of state bodies under its recently-announced Vision 2030 economic plan, a move to bridge budget shortfalls caused by lower oil prices. This program of privatizations will encompass a range of different acts for each situation, from corporatizing government bodies, sales of stakes to strategic shareholders, to listings on the local stock market. SAGO, which handles the storage and operation of silos and production at mills, is looking to sell a stake to a partner, said one of the sources. SAGO, which was previously called the General Silos and Flour Mills Organization (GSFMO), was not immediately available for comment. The sources spoke on condition of anonymity as they were bound by confidentiality agreements. The agency's director-general, Ahmed Al-Fares, said in February that he expects Saudi Arabia to complete the privatization of its flour mills by the first quarter of 2017, although the Public Investment Fund (PIF) determines the final timeframe. The Saudi Cabinet in November approved the establishment of four joint-stock companies to operate the flour mills. These were to be overseen by the state-owned PIF in coordination with SAGO. While a number of regional players would likely be interested in taking a stake in SAGO, the Saudis would prefer bringing in a global partner, said a separate industry source. Saudi Arabia has become a major importer of hard and soft wheat since abandoning plans for self-sufficiency in wheat in 2008, as farming in the desert drained scarce water supplies. SAGO has said that demand for wheat in Saudi Arabia is expected to grow at an annual rate of 3.2 percent to reach 4.5 million tons a year by 2025, largely due to population growth. The state grain agency is expected to import around 3.5 million tons of the grain in 2016. — Reuters
