Saudi-based dairy firm Almarai Co. announced on 1 July that it has reached an agreement to buy all shares in Hail Agricultural Development Co (Hadco), moving into the lucrative Saudi poultry business.

Trade Arabia reports that Almarai, which is the Gulf's largest dairy firm, said in a statement that its bid, accepted by Hadco's board, values Hadco shares at 30.1 riyals (SAR; $8.03) each, which is 3.4 per cent above close on 30 June.

For each five Hadco shares, shareholders will get one new Almarai share and SAR 2.50. This means Almarai will issue six million new shares, which represents a 5.5 per cent capital hike.

"The deal values Hadco at about SAR 949.5 million," Almarai said. Almarai initially offered SAR 22.25 to Hadco's shareholder in November.

In addition to being a key domestic player in the poultry business, Hadco produces olives, wheat, dates and grass fodder. Almarai has its own cattle farms.

The deal can only be concluded if Almarai gets to own all shares in Hadco, which means every Hadco shareholder must approve the bid at an assembly whose date has not yet been set.

A conclusive end to the bid would give the Saudi bourse its first takeover.

Analysts say the pre-eminence of short-term speculation among retail shareholders is acting as a key impediment to more mergers among listed firms.

Olayan Investment Company holds 6.2 per cent of Hadco's capital and Saleh Abdulaziz al-Rajhi and Co holds six per cent. The remainder is held by retail shareholders whose individual stakes are all less than five per cent.

Almarai has been diversifying its revenues through acquisitions and has earmarked 6 billion riyals ($1.6 billion) for investments to expand outside the Gulf region, according to Trade Arabia.