UCA, Saudi Enaya sign non-binding MoU to study potential merger

United Cooperative Assurance Co. (UCA) and Saudi Enaya Cooperative Insurance Co. signed a non-binding memorandum of understanding (MoU) on Dec. 5 to evaluate a potential merger between the two companies.

Both companies will conduct technical, financial, legal, and actuarial due diligence and engage in non-binding discussions on the terms and conditions of the potential merger, the two insurers said in separate statements to Tadawul.

The merger, if agreed upon, will be implemented through share swap. UCA will issue new shares to Saudi Enaya shareholders in exchange for all of the latter’s issued shares.

The two companies agreed that the methodology used for valuation will be based on equity book value (after any mutually agreed due diligence adjustments) and that the swap ratio will be calculated using the respective adjusted equity book value per share as at a mutually agreed cut-off date.

UCA appointed Alinma Capital as its financial advisor for the proposed merger, while Saudi Enaya said it will appoint a financial advisor and announce it on a later date.

The financial and other advisors involved in the due diligence and verification process are expected to evaluate the financial strength rating, performance record, product offerings, potential business opportunities, potential merger incentives, if any, compliance costs on account of existing contracts on account of business operations, employee retention, company location, and any other information, and any relevant adjustments that may have an effect on the carrying amount.

The agreement expires upon the signing of the merger agreement by the two companies or after 180 days from the date of MoU, whichever is earlier.

Any material developments regarding the proposed merger will be announced, in accordance with the relevant laws and instructions.

UCA intends to continue to conduct business as usual until the completion of the proposed merger, it said.

The proposed merger is subject to the completion of due diligence to the parties’ satisfaction, agreement on final terms and conditions of the merger agreement, and the approval of the competent authorities and the general assemblies of both companies.

The MoU does not imply that a merger will be agreed between the two companies, the statements said, adding that further announcements will be made when appropriate.

In January, Saudi Enaya shareholders rejected a merger offer from Amana Cooperative Insurance Co., Argaam reported.

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