Gulf Union Alahlia, Al Sagr ink non-binding MoU to appraise potential merger

Logos of Gulf Union Alahlia Cooperative Insurance Co. and Al Sagr Cooperative Insurance Co.

Gulf Union Alahlia Cooperative Insurance Co. signed on Sept. 19 a non-binding memorandum of understanding (MoU) with Al Sagr Cooperative Insurance Co. to evaluate the feasibility of a merger.

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, they said in separate Tadawul statements.

The MoU would expire on the signing of the merger agreement or after nine months from the date of the MoU, whichever is earlier.

The agreement could be extended by mutual consent of the parties, and each party has the absolute right to terminate the MoU by providing a written notice at any time for any reason and without any liability.

In the event of signing the binding merger agreement and securing the regulators and shareholders general assembly approvals, the potential merger will be implemented though a share swap. Gulf Union Alahlia will issue new shares to Al Sagr shareholders in exchange for all issued shares of Al Sagr after the proposed merger is completed.

The share-for-share exchange ratio between the two companies will be determined after concluding (to the satisfaction of each party) all necessary due diligence referred to above.

The adjusted net equity book value of both companies as reported in their most recent financial statements published on or before the date of signing of the merger agreement, after agreement between the parties on necessary adjustments resulting from the due diligence process, will be the basis for determining the exchange ratio.

Al Sagr Insurance appointed Alinma Investment as its financial advisor on the proposed merger, while Gulf Union Alahlia is yet to appoint a financial advisor.

Both firms will continue to disclose any material developments regarding the proposed merger in accordance with the relevant laws and regulations.

The proposed merger is subject to the completion of due diligence to the parties’ satisfaction, agreement on final terms and conditions of the agreement, and the approval of the competent authorities and the general assemblies of both the companies, the statements added.

Signing of the MOU does not imply that the proposed merger will be agreed between the two companies, the Saudi-listed insurers noted, adding that further announcements in this regard will be made in a timely manner.

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