The Saudi construction firm may handover shares to the government after its finances were hurt by a drop in oil prices and a temporary exclusion from new state contracts following a deadly crane accident in Mecca.

Construction cranes are seen outside the Grand Mosque in the holy city of Mecca, Saudi Arabia on January 17, 2016.
Construction cranes are seen outside the Grand Mosque in the holy city of Mecca, Saudi Arabia on January 17, 2016. ( Reuters )

Some shareholders in construction giant Saudi Binladin Group (SBG) may transfer part of their shareholdings to the government as part of a financial settlement with authorities, the company said on Saturday.

Binladin, which had more than 100,000 employees at its height, is the biggest builder in Saudi Arabia and important to Riyadh’s plans for large real estate, industrial and tourism projects to help diversify the economy beyond oil.

But Saudi group's finances were hurt by three years of weak oil prices, the slump in the construction industry and a temporary exclusion from new state contracts after a crane accident killed 107 people at Mecca’s Grand Mosque in 2015.

The firm has been forced to lay off thousands of employees.

"Based on information available to management, some of the shareholders may have agreed a settlement that involves transferring some SBG shares to the government of Saudi Arabia against outstanding dues," the company said in a statement that was emailed to Reuters.

Reuters reported on Thursday that Saudi Arabia was taking managerial control of SBG and discussing a possible transfer of some of the group’s assets to the state while its chairman and other family members are in detention.

Banking and industry sources had told Reuters that Riyadh’s move to take control appeared aimed at ensuring the group continues to serve Saudi Arabia's development plans.

The government detained scores of senior officials and businessmen in October as part of a sweeping crackdown on corruption. SBG Chairman Bakr Bin Laden and several family members have been held, the sources said.

Saudi officials are trying to negotiate settlements with detainees, saying they want to claw back some $100 billion of funds that they say rightfully belong to the state. The talks on SBG's future were part of this effort, the sources said.

Ownership of Binladin still remains with the family, but the group was in talks with the government about the potential transfer of some assets or possibly reducing or eliminating the government's outstanding debts to Binladin, the sources said.

SBG said in its statement on Saturday that the firm "remains a private sector company owned by its shareholders." But it also said a five-member supervisory committee had been created with three independent members and two shareholders to run the firm.

It said the committee would "restructure the group and empower the new executive management to lead the projects and overcome the current challenges" and make the firm profitable again.

Source: Reuters