The deal is valued at about $2.2 billion and shareholders of the companies would each own 50 per cent of Saudi International Petrochemical Company (Sipchem) stock.
Sipchem has signed a non-binding agreement to acquire Sahara Petrochemical Company (SPC) in an all-share deal valued at just over $2 billion.
In a statement, Sipchem said that it will issue each Sahara shareholder with 0.84 new Sipchem shares.
The agreement comes four years after the companies put a tie-up on hold, saying it was difficult to proceed with the merger using a structure acceptable to both sides under the regulatory framework at the time. Since then Saudi Arabia’s Capital Market Authority has introduced new rules intended to facilitate mergers and acquisitions.
Shares in Sahara rose as much as 4.1 per cent, while Sipchem shares rose as much as two per cent on Wednesday.
A merger would increase the scale and resilience of the petrochemical sector in Saudi Arabia as well as internationally. It will also provide cost synergies, improve access to feedstock and capital markets.
Sipchem and Sahara are seeking to enter into a binding agreement by 28 February 2019. HSBC is advising Sipchem on the deal and Morgan Stanley is advising Sahara.