Saudi International Petrochemical Company (Sipchem) and Sahara Petrochemical Company have announced that they have entered into a legally binding agreement for a business merger.
Sipchem and Sahara said they propose to implement a business merger of equals by way of Sipchem making a recommended offer to acquire all of the issued shares in Sahara in exchange for the issue of new shares in Sipchem in accordance with the applicable rules and regulations of the Capital Market Authority (CMA).
Under the terms of the deal, Sipchem will issue for every one Sahara share 0.8356 new Sipchem shares. Based on the exchange ratio, the total consideration payable by Sipchem to Sahara shareholders will be the issue of 366,666,666 new Sipchem shares.
The deal is valued at SR8.25 billion ($2.2 billion) and the merger is expected to create an SR16 billion chemicals company. Both Sipchem and Sahara have the Zamil Group, one of the kingdom’s most prominent family businesses, as a significant shareholder, along with the Saudi Arabian government.
Upon completion of the transaction, all of the Sahara shares will be delisted from the Tadawul and Sahara will become a wholly-owned subsidiary of Sipchem.
The companies had entered into a non-binding memorandum of understanding on merger on October 3, 2018.
Assuming the transaction and the capital increase are approved by Sipchem shareholders at the Sipchem EGA and the transaction is approved by the Sahara Shareholders at the Sahara EGA and that all the other conditions are satisfied (or, where appropriate, waived), Sahara shareholders will hold 50 per cent of the enlarged issued share capital of Sipchem (being the aggregate of the issued share capital of Sipchem as at the date of this firm intention announcement and the new Sipchem shares to be issued to Sahara shareholders), the Sipchem statement said.
The transaction will result in Sipchem having an increased share capital of 733,333,332 Sipchem shares, of which 366,666,666 Sipchem shares, representing 50 per cent of Sipchem’s increased share capital, will be held by Sahara shareholders and 366,666,666 Sipchem shares, representing 50 per cent of Sipchem’s increased share capital, will be held by Sipchem shareholders, it said.
The exchange ratio and the resulting ownership split has been agreed as a result of an extensive mutual due diligence and valuation exercise, it added.
Aligned with the goals of Saudi Vision 2030, which aims to create a thriving private sector in Saudi Arabia, the transaction is expected to deliver multiple strategic benefits to the combined business, including:
* Strengthening the product portfolio, diversifying feedstock supply and building out presence along the value chain;
* Increasing scale and resilience in the evolving petrochemicals sector, both in Saudi Arabia and internationally;
* Building on the competitive advantages and complimentary capabilities of Sahara and Sipchem to provide benefits commercially, operationally and functionally;
* Driving efficiency and productivity of the closely situated industrial asset portfolios of each of Sahara and Sipchem in Jubail; and
* Creating a platform with improved financial resources, capital market access, and product and technological expertise to take advantage of local and international growth opportunities, both organic and inorganic.
The merger is expected to provide synergy potential, from both a revenue and cost perspective, which is expected to drive value for shareholders. It is also expected to deliver benefits to the combined workforce, and local and international business partners
Under the terms of the implementation agreement, the board of the combined group shall comprise the following members:
* Two members nominated by the Al-Zamil Group including the existing chairman of Sipchem who shall continue to act as chairman;
* One member nominated by the Public Pension Agency;
* Four members of the existing Sipchem Board (excluding the individuals nominated by the Al-Zamil Group and the Public Pension Agency);
* Four members of the existing Sahara Board (excluding the individuals nominated by the Al-Zamil Group and the Public Pension Agency); and
* A new vice-chairman of the board of the combined group will be appointed from amongst its members.
The chief executive officer of the combined group will be Engineer Ahmed Al-Ohali, who is currently the CEO of Sipchem. The chief operating officer will be Engineer Saleh Bahamdan, who is currently the CEO of Sahara.
The registered office of the combined group shall be located in Riyadh, Saudi Arabia at Al Ma’athar District, King Fahad Branch Road, Cairo Square, Almashariq Tower.
The name of the combined group shall be changed to “Sahara International Petrochemical Company (Sipchem).
