DUBAI - Saudi Arabia’s AlRajhi Holding Group and Dubai’s Al Ghurair have teamed up in a consortium to bid for Saudi Arabian state grain buyer SAGO’s flour mills, three sources familiar with the matter told Reuters.

SAGO, among the world’s largest wheat and barley buyers and which imports Saudi Arabia’s entire wheat supply of about 3.5 million tonnes a year, last year put up the mills for sale in one of the kingdom's first privatisations.

AlRajhi and Al Ghurair, two large family conglomerates, are seeking an adviser to help with a potential deal and raise financing for the purchase, said the sources who declined to be named due to commercial sensitivities.

They are looking to raise debt, up to 60 percent, to fund the transaction, one of the sources said.

SAGO, AlRajhi Holding and Al Ghurair were not immediately available for comment when contacted by Reuters on Wednesday.

HSBC, which is SAGO’s financial adviser for the sale, declined to comment.

SAGO has previously said it would sell its milling operations by placing them in four specially formed corporate entities, while retaining other functions. The entities would each hold grain silos, feed factories and flour mills.

Interested buyers are allowed to state a preference among the four mills, but can only get one, the source said. All four are being treated as individual corporate entities, with their own valuations, the source added.

SAGO last year set a Nov. 30 deadline for so-called qualification applications from investors interested in the sale of the flour mills, seen as a litmus test for other Saudi asset sales to follow.

The kingdom has become a major importer of wheat and barley since abandoning plans in 2008 to become self-sufficient - as farming in the desert was draining scarce water supplies.

SAGO has said that demand for wheat is expected to grow at an annual rate of 3.2 percent to reach 4.5 million tonnes by 2025, largely due to population growth.

(Additional reporting by Davide Barbuscia and Maha El Dahan in Dubai; editing by Emelia Sithole-Matarise) ((Hadeel.AlSayegh@thomsonreuters.com; +971566883310;))