Sipchem and Sahara sign binding merger agreement

December 7, 2018

Saudi International Petrochemical Co. (Sipchem) and Sahara Petrochemicals Co. today announced the signing of a binding implementation agreement for their merger of equals through a share swap.

This follows the signing of a nonbinding memorandum of understanding on 3 October. Sahara and Sipchem each have the Zamil Group, one of Saudi Arabia’s most prominent family businesses, as a significant shareholder.

On completion of the transaction, all Sahara shares will be delisted from the Saudi stock exchange and Sahara will become a wholly owned subsidiary of Sipchem. Under the terms of the implementation agreement, the board of the combined group will comprise two members nominated by Zamil Group, including the current chairman of Sipchem, Abdulaziz al-Zamil, who will continue in this function; one member nominated by Saudi Arabia’s Public Pension Agency; and four members of the existing board of Sahara. The board, meanwhile, will appoint a new vice chairman from among its members.

Ahmed al-Ohali, current CEO of Sipchem, will be the CEO of the combined company while the CEO of Sahara, Saleh Bahamdan, will become the COO of the combined group, whose headquarters will be in Riyadh.

The name of the combined group will be Sahara International Petrochemical Co. (Sipchem). It will appoint a branding consultant to advise on the logo, branding, and spelling of the new name.

The proposed transaction will be transformational in Saudi Arabia and adheres to the country’s Vision 2030. The merger aims to strengthen the companies’ product portfolio, diversifying supply and building out presence along the value chain; increasing scale and resilience in the evolving petrochemicals sector in Saudi Arabia and internationally; building on the competitive advantages and complimentary capabilities of Sahara and Sipchem; driving efficiency and productivity of the closely situated assets at Jubail, Saudi Arabia; 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, organic as well as inorganic.

The companies say that the transaction 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.

The agreement is subject to shareholder and other approvals. HSBC Saudi Arabia is acting as Sipchem’s advisor and Morgan Stanley Saudi Arabia is Sahara’s advisor.

By Natasha Alperowicz

Source: Chemical Week