Cummins Inc. has formed a joint venture with a Saudi Arabia conglomerate that is intended to help the Columbus-based manufacturer expand its markets in the Middle East and operate closer to its customers there.
The partnership with The Olayan Group, announced by Cummins on Tuesday, creates Cummins Arabia, a three-country distribution joint venture in the Middle East, according to a Cummins news release. Each company will have a 50 percent stake in the newly formed company.
Olayan has had a business relationship with Cummins for 60 of Cummins’ 97-year history, as Olayan began distributing Cummins products in Saudi Arabia in 1956, the news release stated.
The joint venture will consolidate the distribution of Cummins products in the United Arab Emirates (UAE), Saudi Arabia and Kuwait. The products are currently distributed by Cummins’ wholly-owned UAE distributor and Olayan-owned independent distributors General Contracting Company in Saudi Arabia and General Transportation and Equipment in Kuwait, Cummins said.
Cummins currently has a Middle East Area Business Organization that is mostly involved in distribution. Headquartered in Dubai, it works with local distributors to serve Cummins customers, said Katie Zarich, manager of external communications for Cummins.
United Arab Emirates, Saudi Arabia and Kuwait are some of the largest markets for Cummins in the Middle East, the company said.
“Today, Olayan’s General Contracting Company is a key distributor for Cummins to sell and service our engines, power generation systems and engine filters in the Saudi Arabia market. With this joint venture, we will be able to access more Middle East markets where we previously did not have significant presence or high market share such as Kuwait and Saudi Arabia,” Zarich said.
The partnership also will provide a platform for the training and employment of nationals in each country.
“Cummins is pleased to partner with Olayan, which is a highly respected leader in the global distribution business,” said Tom Linebarger, chairman and CEO of Cummins Inc. “Olayan brings years of Middle East experience, and this partnership provides opportunities for our companies to grow and expand in this region while enhancing the service and support we provide to customers. Cummins will continue to look for new ways to build global partnerships that drive growth and success for our company, our partners and our customers.”
The joint venture is expected to be completed by June 30, and the first day of trading for it is planned for July 1, pending necessary government approvals, Zarich said. It will be headquartered in Saudi Arabia, and plans are underway to build dedicated facilities there.
The consolidation of joint activities under this new entity provides opportunities for both companies to better align goals and work as one company and allows Cummins and Olayan to achieve greater scale, improve parts availability and inventory management and centralize specific functional support across these countries to provide enhanced and consistent service to customers in the region, Cummins said in the release.
Cummins has about 60 joint ventures total, Zarich said. Some recent examples include a joint venture in 2012 with LiuGong, a leading construction equipment manufacturer in China, and the company’s expansion of its joint venture with Foton Motors in China.
Founded in 1947 in Saudi Arabia.
The Olayan Group is a private, multinational enterprise with diverse commercial and industrial operations in the Middle East and a portfolio of international investments.
The commercial side comprises more than 40 companies, is centered in Saudi Arabia and is engaged in distribution, manufacturing and services. Many of these companies operate in partnership with leading multinational or regional firms.
The Olayan Group has offices in Saudi Arabia, Europe and the United States. Its global investment team focuses on public and private equities, real estate, fixed income securities and other specialized assets.
Who: Cummins Inc. and The Olayan Group
What: Formed Cummins Arabia, a joint venture in the Middle East
Where: Headquartered in Saudi Arabia
Why: Expand Cummins’ markets in the Middle East and consolidate the distribution of Cummins products such as engines, power generation systems and engine filters in the United Arab Emirates, Saudi Arabia and Kuwait. Enhance Olayan’s product offerings and services in the region.