SIIG, Petrochem sign binding agreement to implement merger

Logos of SIIG and Petrochem

Saudi Industrial Investment Group (SIIG) signed today, Oct. 27, a binding merger agreement with National Petrochemical Co. (Petrochem), according to two separate bourse filings.

Under the agreement, SIIG will make an offer to acquire all the issued shares in Petrochem that are not owned by the company in return for issuing new shares to Petrochem’s shareholders in SIIG.

This is in accordance with the provisions of Article (26) of the Merger and Acquisition Regulations, the rules for offering securities and continuing obligations issued by the Capital Market Authority (CMA), and terms and conditions stipulated in the implementation agreement.

Accordingly, SIIG affirmed in a bourse statement today its intention to submit an offer for the purpose of executing the acquisition.

Upon completion of the transaction, Petrochem’s shareholders will own 40.38% of SIIG and SIIG’s existing shareholders will own 59.62%. Substantial shareholders of SIIG post transaction completion will include General Organization for Social Insurance with an ownership percentage of 28.02%.

Pursuant to the terms of the implementation agreement, the transaction will be implemented through the acquisition of all shares issued in Petrochem which are not owned by SIIG through a securities exchange offer in exchange for the issuance of 304.8 million ordinary shares with a nominal value of SAR 10 per share in SIIG to Petrochem’s shareholders.

The consideration shares shall be issued by way of increasing the paid-up share capital of SIIG from SAR 4.5 billion to SAR 7.55 billion, representing an increase in the number of SIIG shares from 450 million shares to 754.8 million fully paid shares, which represents an increase of 67.733% in SIIG’s current share capital.

Upon completion of the transaction, Petrochem shareholders, who are registered in Petrochem’s shareholders’ register at the end of the second trading period following the date of the transaction completion, will receive new shares in SIIG in accordance with the exchange ratio, pursuant to which Petrochem’s shareholders will receive 1.27 shares in SIIG for each share they own in Petrochem.

As a result of the transaction, Petrochem will be delisted from the Saudi Exchange (Tadawul), and become a company wholly-owned by SIIG.

Board and governance arrangements

Petrochem and SIIG agreed, in accordance with the terms of the implementation agreement, to take the necessary procedures so that upon completion of the transaction, the composition of the board of directors of SIIG post-completion will be subject to the following changes:

1) The nomination of two members (to be nominated by Petrochem’s board of directors within no less than 30 business days after the completion date of the transaction) to fill the two vacant seats at the board of directors of SIIG-post-completion.

2) SIIG will procure two vacant seats for the individuals to be nominated by Petrochem’s board of directors through any of the following means:

a. Increasing the size of SIIG’s board of directors from nine members to 11 members at the completion date of the transaction;

b. Procuring the resignation of two members of SIIG’s board of directors;

c. Increasing the size of SIIG’s board of directors from nine members to 10 members and procuring the resignation of one member of SIIG’s board of directors.

As a result of the above changes, it is expected that, following completion of the transaction, the composition of the board of directors of SIIG will be as follows:

- GOSI, which is a substantial shareholder in Petrochem and SIIG, will have representatives on the board of directors of SIIG post-completion. GOSI currently has two representatives at SIIG’s board of directors;

- Two individuals nominated by Petrochem’s board of directors will be nominated to be members of the board of directors of SIIG post-completion;

- The remaining members will be from the then current board of directors of SIIG.