SIIG, Petrochem sign non-binding MoU on share swap, possible merger structure

Logos of Petrochem and SIIG

Saudi Industrial Investment Group (SIIG) signed on Sept. 27, a non-binding memorandum of understanding (MoU) with National Petrochemical Co. (Petrochem) on the share swap ratio and the possible merger structure. 

Petrochem appointed GIB Capital and SIIG appointed HSBC Saudi Arabia as financial advisors for the proposed transaction, according to separate bourse statements. 

Pursuant to the MoU, both companies agreed on the following terms: 

- The proposed transaction will be implemented through a share swap offer made by SIIG to acquire the remaining 50% stake in Petrochem. SIIG will issue new shares to Petrochem shareholders, in accordance with Article 26 of the Merger and Acquisition Regulations. Accordingly, Petrochem shares will be delisted, as it will be 100% owned by SIIG. 

- The swap ratio for the proposed deal is 1.27, pursuant to which Petrochem shareholders will receive 1.27 shares in SIIG for each share held in Petrochem. 

The swap ratio was agreed upon by the two companies after conducting due diligence reviews and the financial valuation of each party.  

The non-binding MoU was subject to the companies reaching a final agreement on the terms of the deal. 

The terms and conditions of the final binding agreement will include obtaining all the required regulatory approvals by the end of the year and the approval of the extraordinary general assembly meeting (EGM) of each company. 

SIIG will announce all the relevant details at a later stage. 

The proposed transaction involves related parties, and a number of board members who have interest in it.  

According to data compiled by Argaam, SIIG owns 50% of Petrochem. 

In September 2020, SIIG and Petrochem received approval from their respective boards to start initial discussions to study the economic feasibility of a merger. 

In April this year, the companies decided to commence reciprocal due diligence on merger following the completion of the initial economic feasibility study, in order to negotiate the terms and conditions and share information regarding the proposed transaction. 

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