Aljazira Takaful Taawuni Company and Solidarity Saudi Takaful Co. signed a modified non-binding memorandum of understanding (MoU) on Jan. 19 to evaluate the feasibility of a merger, the insurers said in separate bourse filings on Monday.
The companies will conduct technical, financial, legal, and actuarial due diligence, and engage in non-binding discussions on the terms and conditions of the potential merger, they said.
Aljazira Takaful and Solidarity initially agreed on the evaluation basis using two methods; equity book value and adjusted equity book value as of Dec. 31, 2019, after conducting the adjustments that will be agreed upon in the due diligence results.
According to the company statements, Aljazira Takaful’s equity book value will be amended as follows:
- The integrated net assets of the takaful insurance portfolio transferred from Bank AlJazira to Aljazira Takaful as of Jan. 1, 2020.
- The embedded value for both the protection and savings takaful portfolio for Aljazira Takaful and the protection and savings takaful portfolio transferred from Bank AlJazira to Aljazira Takaful as of Jan. 1, 2020.
According to MoU, the swap ratio between the two companies’ shareholders will be calculated using the adjusted equity book value of each company’ stock as of Dec. 31, 2019.
On completion of the proposed merger, Aljazira Takaful will issue new shares to Solidarity shareholders, in exchange for all issued shares of Solidarity.
The MoU will expire if either the two firms sign the merger agreement, or as of Sept. 30, 2020, whichever is earlier, they clarified, affirming they will disclose any material news on the potential merger in accordance with the law.
In June 2019, the two companies had signed a non-binding agreement to evaluate a potential merger.
Related: Saudi insurers Solidarity, Aljazira Takaful consider merger
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