UCA, AICC sign non-binding MoU to evaluate potential merger

Logos of United Cooperative Assurance Co. (UCA) and Arabia Insurance Cooperative Co.

United Cooperative Assurance Co. (UCA) signed today, June 19, a non-binding memorandum of understanding (MoU) with Arabia Insurance Cooperative Co. (AICC) to evaluate a potential merger between the two Saudi-listed companies.

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In two separate Tadawul statements, the two parties said they will conduct technical, financial, tax, legal, and actuarial due diligence, as well as engage in non-binding discussions on the terms and conditions (T&Cs) of the proposed transaction.

The MoU will expire on the earlier of the signing of the merger agreement or after a period of 12 months from the MoU date.

The memorandum can be extended by mutual consent of the parties thereto. Each party has the right to terminate it by providing written notice to the other party any time for any reason without liability in relation.

MoU Terms & Conditions

Pursuant to the MoU, both companies agreed that in case of approving the proposed transaction, it would be implemented through a merger, with AICC being the merging company and UCA being the merged company. The merger will take place through a share swap offer by increasing AICC's capital and issuing new shares to UCA’s shareholders based on a swap ratio to be agreed upon by both parties.

UCA and AICC also agreed to negotiate definitive agreements in relation to the transaction that will set out the relevant commercial terms thereof, including the final structure and the final swap ratio.

The MoU also includes customary provisions that regulate confidentiality and other related matters.

The implementation of the transaction is subject to the two companies agreeing on a final binding agreement that determines the relevant T&Cs.

The T&Cs of the final binding agreement mandates all the required regulatory approvals and the no-objection of the extraordinary general assembly of each company on the transaction and its related matters.

Therefore, the execution of the MoU does not mean the parties will reach a final and binding decision regarding the transaction nor its completion.

Pending Actions

The two parties will work to complete all the relevant requirements of the transaction, including conducting due diligence and executing the definitive binding agreement and obtaining the regulatory approvals.

They should then present the planned merger to shareholders of both companies in accordance with the applicable laws and regulations.

The two parties will appoint financial advisors for the proposed merger. Further announcements will be made later.

Approvals

The completion of the planned transaction is subject to a number of regulatory approvals, including the Insurance Authority, the Capital Market Authority, the Saudi Exchange, and the General Authority for Competition. This is in addition to the extraordinary general assemblies of the two companies, in accordance with the relevant regulatory requirements.

Additional Information

The proposed merger is subject to the completion of due diligence to the parties’ satisfaction, agreement on the relevant final T&Cs, and the approvals of the competent authorities and shareholders of the two companies.

The entry into the MoU does not mean that the planned transaction will go through.