SAFCO inks deal to acquire SABIC’s agri-nutrients unit

Saudi Arabian Fertilizer Co. (SAFCO) and Saudi Basic Industries Corporation (SABIC) signed a share purchase agreement, under which SAFCO will acquire 100% of SABIC Agri-Nutrients Investment Co. (SANIC).

The acquisition will take place through increasing the capital of SAFCO and issuing new shares to the shareholders of SANIC, both companies said in a bourse statement.

SANIC owns 50% of the issued capital of both National Chemical Fertilizers Company (Ibn Al Baytar) and Al Jubail Fertilizer Company (Al Bayroni) as well as 33.33% of the issued capital of Gulf Petrochemical Industries Company (GPIC).

The agreement was signed on Dec. 25 for a total value of SAR 4.59 billion based on a three-month volume weighted average price by the close of trading on Dec. 19.

The parties agreed not to include at this stage SABIC’s share in both Ma’aden Phosphate Company and Ma’aden Wa’ad Al Shamal Phosphate Company, as previously referenced in the non-binding memorandum of understanding.

SAFCO which is valued at SAR 32.23 billion will increase its capital by 14.25% from SAR 4.17 billion to SAR 4.76 billion to finance the acquisition.

Post completion of the acquisition, the existing shareholders’ (excluding SABIC) holding will be diluted from 57.01% to 49.9%, which will lead to a decrease in their ownership percentage and their related voting rights.

Ownership percentage of shareholders to whom new shares will be issued after conclusion of the acquisition stands at 50.1%.

For the purposes of acquisition, SANIC was valued by discounted cash flow and comparable company multiples methodologies.

The total value of acquired shares in SANIC will be SAR 4.59 billion and the consideration will be paid through issuing 59.37 million ordinary new shares in SAFCO to SABIC at SAR 77.35 per share.

Accordingly, SABIC’s stake in SAFCO will increase from 42.99% to 50.1%.

The share purchase agreement is subject to the relevant authorities and SAFCO’s extraordinary general assembly’s approval to increase its capital to acquire SANIC.

This agreement comes as a result of the vision shared by SABIC and SAFCO, to enhance and improve efficiencies through consolidation and realization of synergies. It also envisages considerable opportunities for growth and development of competitive advantages in the global marketplace which serve SAFCO’s interests and enhances the rights of its shareholders.

This acquisition is a related party deal. A number of SAFCO directors have an interest in the transaction and are conflicted due to their positions as SABIC’s representatives on SAFCO’s board.

The conflicted board members are Yousef Al Benyan, Anas Kentab, Yousef Al Zamil and Abdulaziz Al Habdan - the representative of the General Organization for Social Insurance of Saudi Arabia (GOSI), which is a major shareholder in SAFCO.