Saudi Petrochemical Producers Sign $2.2B Merger Agreement



(Bloomberg) -- Saudi International Petrochemical Co. signed a non-binding agreement to acquire Sahara Petrochemical Co. in an all-share deal valued at just over $2 billion.

Saudi International Petrochemical Co., or Sipchem, will issue each Sahara shareholder with 0.8356 new Sipchem shares, the companies said in statements Wednesday. The deal is valued at about $2.2 billion, according to Tuesday’s closing price. 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 2 percent during trading in Riyadh on Wednesday.

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 Feb 28. HSBC Holdings Plc’s Saudi Arabia unit is advising Sipchem on the deal and Morgan Stanley is advising Sahara.

To contact the reporter on this story: Matthew Martin in Dubai at mmartin128@bloomberg.net. To contact the editors responsible for this story: Stefania Bianchi at sbianchi10@bloomberg.net Claudia Carpenter.



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