Sahara and Sipchem Agree Merger

Following the resumption of discussions in March, Sahara Petrochemicals and Saudi International Petrochemical (Sipchem) have signed a non-binding memorandum of understanding (MoU), paving the way for a merger of equals.

The companies had previously signed an MoU in December 2013 after talks had progressed to an advanced stage. However, they eventually abandoned their merger plans in June 2014, blaming Saudi Arabia’s inadequate regulatory framework for the collapse of the deal. It is not clear what particular regulatory changes have changed since then.

Now, Sahara and Sipchem have preliminarily agreed a valuation, subject to completion of due diligence and finalizing a binding implementation agreement. The companies will work to enter into such an agreement no later than Feb. 28, 2019, unless they agree to an extension.

Under the terms of the MoU and following execution of the binding implementation agreement, Sipchem will offer to buy all shares from Sahara’s shareholders, issuing 0.8356 of its own shares for each Sahara share. The proposed transaction will result in Sahara and Sipchem each owning 50% of the combined group.

Along with revenue and cost synergies, Sahara said it expects the merger to deliver multiple strategic benefits. These include strengthening product portfolios, diversifying feedstock supply and expanding presence along the value chain; increasing scale and resilience in petrochemicals, both in the Kingdom and internationally; building on both companies’ competitive advantages and complementary capabilities to provide commercial, operational and functional benefits; driving efficiency and productivity of their industrial assets at Jubail; and creating a platform with improved financial resources, capital market access, and product and technological expertise to take advantage of local and international growth opportunities, both organic and inorganic.

The proposed merger remains subject to several approvals, including the Extraordinary General Assemblies of Sahara and Sipchem, regulatory clearance, among others.

The Zamil Group, one of Saudi Arabia’s prominent family businesses, is a significant shareholder in both Sahara Petrochemicals and Sipchem, along with the government.