City Cement signs deal to acquire Umm Al-Qura Cement via share swap

Logos of Umm Al-Qura Cement Co. (UACC) and City Cement Co. (CCC)

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In two separate statements to Tadawul, the companies clarified that based on a swap ratio of 1.11 new shares in CCC for each UACC share and the Oct. 24 closing price of CCC's stock at SAR 18.04 a share (the last trading day prior to this announcement), valuation price for UACC’s stock under the transaction is SAR 20.06 apiece.

Accordingly, UACC’s entire share capital totaled SAR 1.10 billion as per the deal’s valuation.

Meanwhile, CCC's market capitalization as of Oct. 24 amounted to SAR 2.52 billion.

Following the deal’s completion, UACC shareholders will own 30.40% of CCC’s capital following the capital increase resulting from the deal. CCC’s existing shareholders will hold 69.60%, the two Saudi-listed cement providers noted.

CCC will publish an offer document covering all details related to the deal and the shareholder circular with respect to the capital increase and associated risks, after obtaining the necessary regulatory approvals. Additionally, UACC will publish a board resolution circular to its shareholders.

Both companies emphasized that this announcement does not entail a confirmed intention by CCC to submit an offer under the Merger and Acquisition Regulations issued by the CMA. The issuance of a confirmed intention announcement is subject to various conditions outlined in the implementation agreement, requiring coordination with regulatory bodies to ensure compliance with the relevant approval requirements.

The confirmed intention to submit an offer will be announced later after the relevant conditions and prerequisites are met, in any case, before the publication of the shareholder circular and offer document by CCC as well as the UACC board circular.

As of the date of this announcement, Al Abdullatif Holding Group is a related party to the deal, according to the Merger and Acquisition Regulations. It owns 24.53% and 8.7% of CCC and UACC's capital, respectively.

The implementation agreement will expire after one year from the signing date if the conditions of the deal are not met or if there is a waiver from any obligation under a written agreement between the parties involved, unless they agree in writing on a different date. The transaction could also be terminated under the below conditions.

If the deal terminates, all party rights and obligations entailed under the agreement will be ceased. However, some remain binding even after termination, such as confidentiality provisions, governing law, and dispute resolution.

Several factors could lead to the termination of the transaction: First, the parties may mutually agree in writing to scrap the implementation agreement. Second, if the conditions of the deal are not met, or if a waiver from any obligation is not granted under a written agreement between the parties before one year has elapsed from the signing date (unless the parties agree in writing on a different date), the agreement will also be ceased.

Lastly, either party may issue a written notice of termination to the other if one party breaches any provisions of the implementation agreement, resulting in a material adverse event.

Such breaches include violating the business operation restrictions specified in the agreement without obtaining CCC's approval; failing to fulfill the provided warranties; or breaching obligations related to preparing and submitting the necessary documents under relevant regulations, including providing all necessary information to enable the other party to prepare these documents.

Meanwhile, the transaction’s completion is subject to several prerequisites outlined in the implementation agreement. For starters, all necessary approvals from the CMA should be obtained to finalize the deal.

Additionally, the green light must be secured for the capital increase and the issuance of new shares in CCC for the transaction purpose; the go-ahead from Saudi Tadawul Group Holding Co. (Tadawul Group) for listing the swapped shares on the Saudi Exchange (Tadawul); and any other approvals that Tadawul Group may require in this regard.

Any notices that may be mandated by the Securities Depository Center Co. (Edaa) regarding the deal must also be filed. Furthermore, the General Authority for Competition’s (GAC) nod on the transaction or the expiry of the review period for the economic concentration request, as stipulated in the Competition Law and its implementing regulations, must be secured.

Additionally, a no-objection from the Ministry of Commerce on the proposed amendments to CCC’s Articles of Association amid the company’s planned acquisition of UACC is necessary.

The CMA’s approval is also required to publish the shareholder circular and the offer document related to the deal. Moreover, the market regulator’s go-ahead should be granted for convening both cement providers’ extraordinary general meetings (EGMs) discussing CCC’s buyout of UACC.

The two companies must secure the approval of three-quarters of the EGM quorum of shareholders of both CCC and UACC. They are also mandated to announce results of their respective EGMs to the public.

They are also required to refrain from the occurrence of any event, change, or combination of events or changes that would have, or is reasonably expected to have, a material adverse impact on the business, assets, liabilities, financial position, profitability, or future outlook of either party, or on the deal or its execution.

Additionally, there should be no breach of any warranties granted by either CCC or UACC, unless the breaching party reconciles as desired by the party in breach taking. This is provided that this breach is deemed remediable as outlined in the implementation agreement.

There should also be no decision, regulation, instruction, order, ruling, or decree from any Saudi governmental body that would render the completion of the deal unlawful or illegal.

CCC and UACC are mandated to obtain their contracting parties’ go-ahead on the takeover transaction, as stated in the implementation agreement.

The table below highlights the acquisition details:

In November 2022, CCC signed a non-binding MoU with UACC to mull a share-swap deal, under which the former will acquire all issued shares in the latter, data compiled by Argaam showed.

In April 2023, the two companies agreed to extend the non-binding MoU for an additional six months. Later in October 2023, they extended the MoU for another six months, followed by a further six-month extension in April 2024.