Saudi International Petrochemical Company (Sipchem) and Sahara Petrochemical have signed a memorandum of understanding on a potential asset merger, bringing the deal, which would take the form of a share swap, one step closer to fruition.

Sipchem said a closing could come in the first half of 2014. According to reports, the merged company would be worth $5 million, with Sipchem taking on the role of corporate parent to Sahara.

In early November, the chemical producers which have a common shareholder, Zami Holding Company Group, had said they were still "progressing detailed studies and negotiations in relation to the potential merger," following a five-month economic and technical feasibility study. A non-binding agreement expires at the end of January.

Sahara focuses on olefins ethylene and propylene as well as polyethylene and polypropylene. Sipchem produces methanol, butanediol, tetrahydrofuran, carbon monoxide and a number of acetyls products such as acetic acid, acetic anhydride and vinyl acetae monomer (VAM).