Arabian Shield, Alahli Takaful ink MoU on potential merger

Logo of Arabian Shield Cooperative Insurance and Alahli Takaful

Arabian Shield Cooperative Insurance Co. entered into a memorandum of understanding (MoU) on April 11, 2021, with Alahli Takaful Co. (ATC) to begin a reciprocal due diligence process and negotiate the final terms of the potential merger, the companies said in separate bourse filings.

The two companies agreed the following on a non-binding basis:

- The proposed transactions, should it proceed, will be completed by way of a merger (pursuant to the Companies Law and the merger and acquisitions regulations issued by the board of the Capital Market Authority (CMA) and other relevant laws and regulations) with ATC merging into Arabian Shield;

- The two companies initially agreed that the basis of the valuation will be using the adjusted equity book value method (after any mutually agreed due diligence adjustments), in addition to the embedded value of the protection and savings portfolio of ATC.

- ATC shareholders will receive newly issued share of Arabian Shield in exchange for every share they hold in ATC.

The parties will also agree the final structure of the proposed transaction, the final exchange ratio, subject to due diligence and valuation analysis, the composition of the board and the management structure for the combined entity.

The future merged entity will continue to be branded as the Arabian Shield Cooperative Insurance Co. and continue to be headquartered in Riyadh

The merger expects to absorb all of ATC’s employees into Arabian Shield and should not result in any involuntary redundancies.

Arabian Shield appointed AlJazira Capital as its financial advisor in connection with the proposed transaction, while Falcom Financial services was hired by ATC as its financial advisor.

The MOU shall terminate on the earlier of the following:

The execution of the merger agreement by Arabian Shield and ATC, or the expiry of the exclusivity period mentioned in the MoU, or the mutual written agreement of both Arabian Shield and ATC to terminate the MoU, or if any of Arabian Shield or ATC provides a written notice terminating the MoU to the other at any time four months from the date of execution of the MoU.

Arabian Shield and ATC will continue to duly disclose any material developments in relation to this transaction, both companies added, noting that there are no related parties to the deal.

The proposed merger is subject to the completion of due diligence, agreement on final terms of the merger, as well as the approval of the competent authorities and the general assemblies of the companies.

According to Argaam data, the sector witnessed previous agreements and mergers as follows: