Walaa Insurance, SABB Takaful sign non-binding MoU to study potential merger

Logos of Walaa Insurance and SABB Takaful

Walaa Cooperative Insurance Co. (Walaa Insurance) and SABB Takaful Co. signed a non-binding memorandum of understanding (MoU), on July 14, to evaluate a potential merger between the two companies, the insurers said in separate statements to Tadawul.

Both companies will conduct operational, technical, financial, legal, and actuarial due diligence and engage in non-binding discussions on the terms and conditions of the potential merger.

If the evaluation leads to signing of a merger agreement, it will be implemented through an exchange of shares, the statements said.

Walaa Insurance will issue new shares to SABB Takaful’s shareholders in exchange for all issued shares of SABB Takaful, after the proposed merger is completed. 

The share-for-share exchange ratio between Walaa Insurance and SABB Takaful will be determined after concluding all necessary due diligence. The adjusted book equity value of the two companies will be the basis for the exchange ratio.

The exchange ratio will be calculated using the respective adjusted book value per share of the two companies in their most recent financial statements published on or before the date of signing of the merger agreement.

Financial and other advisors involved in the due diligence process are expected to evaluate the financial strength rating, track record, product offerings, potential business opportunity, potential merger incentives, if any, commitment costs on account of existing contracts on account of business operations, employee retention, office location, and any other relevant information that may have a bearing on the adjustments to the book value.

The potential merger will lead to absorbing all of SABB Takaful’s employees into Walaa Insurance, and should not result in any involuntary redundancies, the statements said.

The MoU will expire either on signing of the merger agreement or after a period of 180 days, whichever is earlier. The MoU can be extended by mutual consent of both parties.

The parties can also mutually agree to terminate the MoU by written notice at any time.

Walaa Insurance appointed AlJazira Capital as its financial advisor for the proposed merger, while SABB Takaful appointed Saudi Fransi Capital.

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