Al-Ittefaq Steel Products Company, one of Saudi Arabia's three largest steel producers, hopes to sell a 30 per cent stake in an initial public offering in the fourth quarter of 2008.

'We will float 30 per cent stake ... We will decide after the valuations whether to go for a capital increase or sell only exisiting shares,' chief financial officer Shabir Rafiqi told Reuters in a telephone interview.

The firm has mandated Gulf International Bank as lead manager and financial adviser for the IPO. The bank holds a 2.3 per cent stake in the company.

Al-Tuwairqi family is the company's majority shareholder with a near 77 per cent stake held through a holding company.

The company had a turnover of SR2.9 billion ($773.3 million) in 2007 and its net margin stood at about 8-9 per cent, Rafiqi said.

The IPO could take place in the fourth quarter subject to approval of the regulator, the Capital Market Authority, he added.

'We want to use proceeds of the IPO to help fund projects in the pipeline and our expansion plan in the years to end-2012. We have identified expansion projects worth approximately $2 billion,' Rafiqi said.

The projects consist mainly of melt shops, direct reduction plants and flat products plants, he said.   'We are also looking at iron ore mining in India and possibly Brazil and Australia,' he said. 'We want to have a complete integration and become a global player in steel industry'.

The firm expects to start this year a rolling mill in the Red Sea city of Jeddah with an annual capacity of 1.2 million tonnes, he said.

'Now we produce 2 million tonnes which will increase to 3 million tonnes with the Jeddah plant,' he said.

It also hopes to start next year a 1.5 million tonnes direct reduction iron plant in Karachi, Pakistan, he added.-Reuters