The merger will also improve shareholders’ equity into the resulting company, given the fact that Sahara has debts (SAR 7.3 billion) lower than Sipchem.
Aljazira Capital said also that Sipchem’s latest valuation of Sahara’s shares has awarded Sahara’s shareholders a 22 percent increment above an earlier valuation conducted in 2013.
The merger could help diversify both companies’ downstream products, mitigating the risks associated with current dependence on a single product base. It could also help diversify feedstock and thereby reduce the risk of subsidy reduction.
Moreover, the combined entity will be better placed to benefit from the marketing and logistic experience of each counterparty.
The merger will make Sipchem self-sufficient in primary olefins, as it will source ethylene feedstock from Sahara’s subsidiary, Saudi Ethylene and Polyethylene Co. (SEPC). While Sahara can bank on Sipchem’s logistics and marketing arms in Asia and Europe.
On October 3, Sipchem and Sahara signed a non-binding memorandum of understanding (MoU) to carry out a merger, whereby Sipchem will fully acquire Sahara via share swap.