(MENAFN - Arab News) The Saudi International Petrochemical Company (Sipchem) and Sahara Petrochemical Company (Sahara) have jointly signed a memorandum of understanding (MoU) to start the due diligence process over a proposed business merger between the two companies, according to a statement posted on the Saudi stock exchange (Tadawul).
If the proposed merger is completed, Sahara will become a subsidiary of Sipchem and new 300.57 million shares will be issued to Sahara shareholders thus bringing the total number of the issued shares to 667.2 million and raising the capital to SR6.67 billion, the statement said.
The current shares of Sipchem stand at 366.6 million, or SR3.66 billion.
The proposed merger is expected to enhance the company's leading position in the local and international petrochemical industry and boost the operational efficiencies where the merged company would become a stronger platform for further growth in the long-term, according to the statement.
The deal was signed by Ahmed Al-Ohali, CEO of Sipchem, whereas Isam Hamdi, CEO of Sahara, signed for his company.
The two companies plan to finish their evaluation of the proposed merger
with the intention of being in a position to sign the merger agreement in the first half of 2014, the statements said.
However, the proposed merger, if finalized, will be subject to various conditions and approvals, including without limitation, the approval of the Capital Market Authority (CMA), the general assembly of each company and the competent Saudi regulatory authorities, it said.
Based on the proposed merger, Sahara has selected Morgan Stanley Saudi Arabia as its financial adviser, Al-Jadaan & Partners Law Firm as its Saudi legal adviser, Clifford Chance LLP as its international legal adviser, and IHS Inc. as its technical and market consultant, whereas Sipchem appointed HSBC Saudi Arabia as its financial adviser, Zeyad S. Khoshaim Law Firm as its Saudi legal adviser, Allen & Overy LLP as its international legal adviser, Jacobs Consulting as its technical consultant, and Nexant as its market consultant.