Dubai/London: Saudi International Petrochemical Co. and Sahara Petrochemicals Co. have held early-stage talks on reviving a merger which stalled in 2014 and would create a Saudi Arabian chemicals company with a market value of about $2.7 billion, people with knowledge of the matter said.
Preliminary talks between board members of both companies have taken place, the people said, asking not to be identified as the information is private. No agreement has been reached and a deal may not occur, they said. HSBC Holdings Plc’s Saudi Arabia unit is advising Sipchem and Morgan Stanley is advising Sahara, the people said. Both banks were involved in the 2014 merger talks.
If the two companies proceed with a deal it would be the largest merger or acquisition in the country in at least the last 10 years, according to data compiled by Bloomberg. Talks between the two chemicals firms were put on hold in 2014 because of difficulties finding a way to proceed using a structure that was acceptable to both sides, the companies said at the time.
The value of the two firms has more than halved since the last time they were discussing a merger amid a slump in oil prices and slower economic growth that’s weighed on the Saudi stock market. The two companies are facing rising costs as the government looks to save money by reducing subsidies. Sipchem said earlier this year it expects cuts to have a 120 million-riyal financial impact in 2016, and Sahara said the subsidy reduction would increase its costs by 3 per cent.
Spokesmen for HSBC Saudi Arabia Ltd. and Morgan Stanley declined to comment, and Sipchem and Sahara didn’t respond to calls and e-mails requesting comment.
[BOX] Saudi Sipchem to recall sukuk before maturity -bourse filing
DUBAI, May 12 (Reuters) — Saudi International Petrochemical Company (Sipchem) plans to recall a sukuk maturing on July 6 three weeks early, it said in a bourse statement on Thursday. The firm will send a notice to sukuk holders informing them of its intentions and will use available cash to pay it off. It originally issued 1.8 billion riyals of sukuk in 2011. The company will redeem the sukuk on June 15. Sipchem also plans to issue a new sukuk, the company said on March 28, and appointed Riyad Capital and NCB Capital as lead managers for the issue.