SIIG-Petrochem merger to create stronger entity in industrial investment: CEO

Logos of Saudi Industrial Investment Group and National Petrochemical Co.

Abdulrahman Saleh Alismail, CEO of Saudi Industrial Investment Group (SIIG), said that the planned merger with National Petrochemical Co. (Petrochem) is a normal step to enhance business integration through the consolidation of the two parent companies. The merger will create a bigger and stronger entity in the field of industrial investment in the region.

The projects of both companies are largely complementary and integrated. The merger is expected to generate SAR 13-17 million in annual cost synergies, Alismail told Argaam in an exclusive.

Moreover, the integration of subsidiaries will also lead to more savings, through boosting production at all work sites and optimizing the use of assets.

Here’s the full interview with Alismail:

What is the reason behind SIIG’s full acquisition of Petrochem? Why now?

The projects of SIIG and Petrochem are largely integrated. Petrochem project was established and developed by SIIG, before the offering of Petrochem as an independent joint stock company. Moreover, the projects of both companies are connected. Therefore, the deal is a normal step to enhance business integration through the consolidation of both parent companies. The merger will create a bigger and stronger entity in the field of industrial investment across the region.

Although we took some time to reach this point, it was better to wait for the stability of operations in all projects, to have a better evaluation; hence, grant shareholders a fair value of the deal. In the meantime, the acquisition comes at a time when the industry is facing many challenges. Companies should be more capable to address these challenges.

What are the challenges facing the industry?

Like other industries that offer services and products, as well as compete globally, we also constantly deal with the variable business environment, whether such variables include technology upgrade, or fierce competition in terms of the number of producers and product presentation. In addition, the variables may also include changing government and environmental regulations that affect our business. Therefore, upon completion of the acquisition, SIIG will be stronger to overcome such challenges.

What are the expected benefits from the deal?

In addition to direct savings estimated at SAR 13-17 million annually, the group will make more savings from the integration of its subsidiaries’ businesses, through boosting production at all work sites, utilizing our assets and resources optimally, as well as responding to market conditions and global prices, which leads to more diversity and reduces risks.

At the post-acquisition stage, the company will have a stronger financial position and the ability to make better decisions for long-term growth.

What are SIIG’s growth plans after the acquisition?

Since SIIG is a holding company focusing on investment in the industrial sector, it has the flexibility and ability to respond to promising investment opportunities in the future, which will contribute to achieving growth and generating value for shareholders, whether within the petrochemical sector or in other strategic industrial projects that capitalize on positive market dynamics as per the Kingdom's Vision 2030 goals.

What are the main terms of the deal?

SIIG will acquire the remaining issued shares of Petrochem in return for issuing new shares for Petrochem shareholders in the group.

Petrochem shareholders will get 1.27 shares in SIIG in consideration for each share held in Petrochem through a share swap. SIIG will issue 304.8 million ordinary shares at a nominal value of SAR 10.

Petrochem’s shareholders of record by the close of the second trading period after the effective date will receive new shares in SIIG when the deal is approved by the extraordinary general meeting (EGM). The swap ratio was agreed by the boards of directors of the two companies after the due diligence process.

What are the next steps?

SIIG and Petrochem will hold EGMs and their shareholders will vote on the deal, which will come into effect if approved by 75% of shareholders.

SIIG will raise its capital and issue shares to selling shareholders in Petrochem, pursuant to the applicable measures in the Saudi Exchange (Tadawul). The shares of Petrochem will be delisted, and the company will transform into a closed joint stock company, fully owned by SIIG.