Saudi Arabia’s Sipchem, Sahara in advanced merger talks

28 October 2013 06:27  [Source: ICIS news]

Saudi Arabia’s Sipchem, Sahara in advanced merger talksKARACHI (ICIS)--Two major Saudi Arabian petrochemical firms – Saudi International Petrochemical Co (Sipchem) and  Sahara Petrochemical – are in advanced stage of discussions about a potential merger, the companies said late on Sunday.

“The two companies are still progressing detailed studies and negotiations in relation to the potential merger,” Sipchem said in a statement to Saudi stock exchange.

Sipchem picked HSBC Holdings as its adviser on the proposed merger.

In July, Sipchem and Sahara Petrochemicals entered into a non-binding agreement to conduct a feasibility study on the proposed merger for the next five months.

“If the potential merger is agreed, it is currently expected that it will be subject to various conditions and regular procedures with most important, approval at the general assembly of each company and approval of the Saudi Arabian regulatory authorities,” Sahara said in a separate statement.

If everything goes according to plan, a tie-up is expected to materialize by January 2014.

Mergers between two listed Saudi firms are very rare. But, Sipchem and Sahara have Zamil Holding Company Group as a strategic stakeholder.

Zamil – which one of the most prominent businesses in Saudi Arabia with interests in petrochemicals, steel, construction and other industrial sectors – owns 7.9% of Sahara and 9.6% of Sipchem.

The Saudi government’s pension fund also has holdings of over 5% in Sahara and Sipchem.

No value has been given for the proposed merger. As of end-June, Sipchem’s total assets were at Saudi riyal (SR) 15.2bn ($4.1bn), while Sahara’s stood at SR8.6bn.

A tie-up between the two companies would give the combined entity a greater product range, as Sahara produces basic petrochemicals and Sipchem focuses on more high-value products, analysts said.

Sipchem makes methanol, butanediol, tetrahydrofuran, acetic acid, acetic anhydride, vinyl acetate monomer, as well as carbon monoxide, according to the company’s website.

Sahara, on the other hand, makes propylene, polypropylene, ethylene and polyethylene.

($1 = SR3.75)

By: Aamir Ashraf

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