Saudi Petrochemical Producers Sign US$2.2 billion Merger Agreement

Saudi International Petrochemical Company has signed a non-binding agreement to acquire Sahara Petrochemical Company in an all-share deal valued at just over US$2 billion.

Saudi International Petrochemical Company, or Sipchem, will issue each Sahara shareholder with 0.8356 new Sipchem shares, the companies said on the 3^rd October.

The deal is valued at about $2.2 billion, according to the closing price on the 2^nd October.

Shareholders of the companies would each own 50 percent of Sipchem stock.

The agreement comes four years after the companies put a tie-up on hold, saying it was difficult to proceed with the merger using a structure acceptable to both sides under the regulatory framework at the time. Since then Saudi Arabia’s Capital Market Authority has introduced new rules intended to facilitate mergers and acquisitions.

Shares in Sahara rose as much as 4.1 percent, while Sipchem shares rose as much as two percent during trading in Riyadh on the 3^rd October.

A merger would increase the scale and resilience of the petrochemical sector in Saudi Arabia and internationally, according to the statements. It will also provide cost synergies, improve access to feedstock and capital markets.

Sipchem and Sahara are seeking to enter into a binding agreement by the 28^th February.

HSBC Holdings Plc’s Saudi Arabia unit is advising Sipchem on the deal and Morgan Stanley is advising Sahara.

Source: Rigzone