Arab News, Wednesday, May 15, 2019 | Ramadan 10, 1440
Saudi’s Sipchem, Sahara to seek deals in US and Asia after merger
Saudi Arabia: Saudi International Petrochemical Co. (Sipchem)
and Sahara Petrochemical plan to target acquisitions and joint ventures in the
United States and Asia when their merger is completed in order to expand market
reach, top executives said.
The new entity, Sahara International Petrochemical Company, will have combined
assets worth more than 22 billion riyals ($5.9 billion), ranking second after
the kingdom’s biggest petrochemicals firm, Saudi Basic Industries (SABIC).
“Combining Sipchem and Sahara will create an integrated petrochemical leader
with an improved competitive position in Saudi Arabia and globally,” said Sahara
CEO Saleh Bahamdan, who will also be CEO of the new entity.
“We are looking at opportunities in Asia and US markets for either acquisition
or organic growth, JVs, and locally we are also exploring,” said Sipchem CEO
Abdullah Al-Saadoon, who will be the new company’s chief operating officer.
Growth opportunities will be evaluated and prioritized after the combined
entity’s management and board are appointed, both executives told Reuters in an
interview, without giving further details.
Shareholders of the two firms will hold separate meetings on May 16 to vote on
the merger in the last step before completion.
The duo called off a tie-up in 2014, citing an inadequate regulatory framework,
but revived it in 2018 as consolidation gained momentum in the Saudi corporate
sector as part of the government’s Vision 2030 drive to diversify the economy
and boost the private sector to create jobs for a young population.
“The transaction comes in line with Vision 2030 goals to build national
companies with strong local and international reach in a sector that has been
identified as a priority for the future Saudi economy,” said Bahamdan.
The petrochemical sector, which produces chemicals using oil and natural gas as
raw materials, is the backbone of the kingdom’s manufacturing sector. Its
flagship is SABIC, the world’s fourth largest petrochemical firm, the majority
of which was recently acquired by Saudi oil giant Aramco.
Sahara produces basic petrochemicals while Sipchem focuses on more high-value
products. The tie-up will expand their product portfolio, increase purchasing
power and reduce raw material costs, boosting competitiveness and
“The merger between Sipchem and Sahara is expected to create synergies of
175-225 million riyals in recurrent EBITDA (earnings before interest, tax,
depreciation and amortization) annually, coming from increased revenue and also
optimising cost,” said Saadoon.
The synergies will start in the first year of completing the deal and will be
fully realized in three years, Bahamdan said.
The two companies will have a shared services structure, including human
resources, IT, finance, maintenance and technical services.
They will also have increased scale for procurement and boost cross-selling
through 24 companies and affiliates offering 30 distinct petrochemical products,
Both Sipchem and Sahara have the Zamil Group, one of the kingdom’s most
prominent family businesses, as a significant shareholder, along with the Saudi