Sipchem, Sahara said to reconsider merger plan

Saudi International Petrochemical Co. (Sipchem) and Sahara Petrochemicals Co. have held preliminary discussions on reviving a merger, which stalled in 2014, to create a chemicals company with a market value of about $2.7 billion

Board members from both companies have met for talks, but no agreement has been reached so far, Bloomberg reported, citing unnamed people with knowledge of the matter, who said the deal might not happen at all.

HSBC Holdings Plc’s Saudi Arabia unit is advising Sipchem, while Morgan Stanley is advising Sahara. Both banks were involved in the 2014 merger talks.

This would have been the largest merger or acquisition in the country in at least the past 10 years if the two companies decided to proceed.

Discussions had stalled in 2014 as both companies struggled to find a structure acceptable to both sides, the firms had said at the time.

Since then, the value of the two companies has more than halved amid a slump in oil prices and slower economic growth. Costs, meanwhile, continue to rise as Saudi Arabia reduces subsidies to cut costs.

Earlier this year, Sipchem said it expects a financial impact amounting to SAR 120 million due to subsidy cuts. Sahara said the subsidy reduction would increase its costs by 3 percent.