Saudi Military’s Latest Acquisition, JVs at Paris Air Show to Boost Local Defense Ambitions

Although Saudi Arabia is the world’s third biggest military spender ($67.6bn), only 2 percent of this spending is within the Kingdom.

DESPARDES — Saudi Arabian Military Industries (SAMI), has bought Riyadh-based Advanced Electronics Company for an undisclosed sum.

The acquisition report comes as the two-year old company owned by the kingdom’s Public Infrastructure Fund, recently signed several strategic deals with global defense firms at the Paris Air Show.

The state-owned defense company signed an agreement with France’s Figeac Aéro for a joint venture to manufacture metallic military and commercial plane parts (aero parts) in the kingdom.

At present, the kingdom’s defense industrial sector is limited to only seven companies and two research centers.

The strategic partnerships with global businesses involved in the four areas of the company’s work — air and ground systems, weapons, missiles and defense electronics.

Saudi officials also met with top executives of Thales Group, Airbus, Boeing Defense, Space and Security, Lockheed Martin, Raytheon. The talks were aimed at Saudization of military industries.

Acquiring 100 percent ownership of AED by SAMI forms part of the process. 

The kingdom aims to localize over 50 percent of military equipment spending by 2030.

Advanced Electronics Company is an offset company set up in 1988 by engineering and defense contractors including the United Kingdom’s BAE Systems to help Saudi Arabia build its own military and engineering capabilities.

A statement issued on Monday evening announcing the deal said the firm “specializes in the design, development, manufacturing, maintenance and repair of several advanced industry and military electronic systems, devices and equipment” including control systems for various military aircraft. It added that the company, which has an 80 percent Saudization rate, increased revenue by 7.5 percent last year to 2.07 billion Saudi riyals ($552 million) from 1.925 billion riyals in 2017.

The statement said that following the deal, AEC will form the core of SAMI’s defense technology systems business, and that the enlarged business would employ more than 2,200 people. It also said the deal would help SAMI’s goal of developing its own products.

One of the company’s aims is to localize around 50 percent of the Saudi government’s military spending which is line with the kingdom’s as Vision 2030. At present, Saudi Arabia is the third largest defense spender ($67.6bn), and dependent on 98 percent purchases from global defense suppliers.