Sahara and Sipchem sign a MoU regarding a proposed merger

Sahara Petrochemical Co. announces the signing of a memorandum of understanding with Saudi International Petrochemical Company for begin confirmatory due diligence and continue the non-binding negotiations relating to the detailed terms of a proposed business merger between the two companies based on the principles of a merger of equals (the Proposed Merger ). as following:

1.Signed the Memorandum on Wednesday 04-12-2013
2.Related parties : Sahara Petrochemicals Company and Saudi International Petrochemical Company
3.The signing of the MoU comes as a result of the preliminary conclusions of the studies and negotiations in relation to the Proposed Merger which indicate that, subject to agreeing certain key terms, the Proposed Merger will be a positive transformational step in the business of the Company.

The Proposed Merger is expected to enhance the Company s leading position in the local and international petrochemical industry and the combined business is expected to result in significant synergies related to operational efficiencies and the combined company would become a stronger platform for further growth in the long-term.

The MoU has been signed by Eng. Esam Fouad Himdy, CEO and Managing Director of the Company, on behalf of the Company, and Eng. Ahmad Al-Abdulaziz Al Ohali, CEO and Managing Director of Sipchem, on behalf of Sipchem, in the city of Riyadh.

In this regard, Eng. Himdy and Eng. Al-Ohali have jointly commented as follows: If completed, we hope that the Proposed Merger will benefit our shareholders and our employees. Indeed, the expectation is that the Proposed Merger will be positively transformational and potentially have significant benefits for both companies. The terms of the Proposed Merger will be underpinned by a shared commitment to achieve a fair result and create value for each company s shareholders based on the principles of a merger of equals. This is an important precedent in the petrochemical sector in the Kingdom of Saudi Arabia, which will, God-willing, result in a larger, more capable, and more competitive company that can increase investments in new projects in the Kingdom and globally, and will provide exciting growth opportunities for management and employees, adding value to the shareholders of both companies.

Both companies have agreed that, in the event the Proposed Merger occurs, it will be implemented by way of an exchange of shares where, after the Proposed Merger is completed, the Company will become a subsidiary of Sipchem. Under the terms of the Proposed Merger, Sipchem will issue 0.685 new shares for every one issued share in the Company. Accordingly, based on the agreed exchange ratio, if the Proposed Merger is completed, Sipchem will issue 300,574,575 new shares to the Company s shareholders in exchange for all issued shares in the Company.

The MoU does not constitute an offer by Sipchem to the Company s shareholders or to its board of directors, nor does it constitute an announcement of a firm intention to make an offer. Under the MoU, the Company and Sipchem have agreed to continue to co-operate with each other to complete the financial, technical, commercial, market and legal due diligence, agree an integration plan, and the governance and strategy of the combined group as well as the preparation of the definitive documentation required to implement the Proposed Merger. Should the companies agree to proceed with the Proposed Merger, they intend to enter into a definitive legally binding merger agreement that, amongst other things, will specify the terms of Sipchem s potential offer addressed to the Company s shareholders and its board of directors (the Merger Agreement ). Both companies will continue to conduct business as usual and both companies shares will continue to trade as usual until completion of the Proposed Merger.

Currently, both companies intend to finish their evaluation of the Proposed Merger with the intention of being in a position to sign the Merger Agreement in the first half of 2014.The MoU will expire on the earlier of the date on which the Merger Agreement is signed by the companies or by notice for termination of the studies from either company to the other.

The entry into the MoU does not mean that the Proposed Merger will be agreed between the two companies, that an offer will be eventually made in relation to the Proposed Merger, or that the terms or timing of any potential offer have been confirmed. If the terms of the Proposed Merger are agreed, it is expected that it will be subject to various conditions and approvals including, without limitation, the approval of the Capital Market Authority, the approval at the general assembly of each company, and the approval of the competent Saudi Arabian regulatory authorities.

In respect of the Proposed Merger, the Company has appointed Morgan Stanley Saudi Arabia as its financial advisor, Al-Jadaan & Partners Law Firm as its Saudi legal advisor, Clifford Chance LLP as its international legal advisor, and IHS Inc. as its technical and market consultant. Sipchem has appointed HSBC Saudi Arabia Limited as its financial advisor, Zeyad S. Khoshaim Law Firm as its Saudi legal advisor, Allen & Overy LLP as its international legal advisor, Jacobs Consulting as its technical consultant, and Nexant as its market consultant.
The following are the names of the related parties and board directors who are considered, as at the date of this announcement, to have a conflict of interest in relation to the Proposed Merger:

1) Al-Zamil Group Holding Company (Represented by H. E. Abdulaziz Al-Zamil in both Sipchem and Sahara).
Reason for conflict of interest: Board member in both Sipchem and Sahara and Owns shares in both Sipchem and Sahara.
2) Public Pension Agency ( PPA ) (Represented by Mr. Jabr Al-Jabr in Sahara).
Reason for conflict of interest: PPA is a board member in Sipchem and Sahara, owns shares in both Sahara and Sipchem, and owns shares and is a manager in International Diol Company, an affiliate of Sipchem.
3) Dr. Abdulrahman Al-Zamil.
Reason for conflict of interest: Board member in both Sipchem and Sahara and Owns shares in both Sipchem and Sahara.
4) Mr. Saeed Al-Esayi.
Reason for conflict of interest: Board member in Sahara and shareholder in Sipchem and Sahara.
5) Al-Mutlaq Group (Represented by Mr. Tariq Al-Mutlaq).
Reason for conflict of interest: Board member in Sahara and shareholder in Sipchem and Sahara
6)H. E. Abdulaziz Al-Zamil (Representing Al-Zamil Group Holding Company in Sahara and Sipchem).
Reason for conflict of interest: Board member in both Sipchem and Sahara representing Al-Zamil Group Holding Company and Owns shares in both Sipchem and Sahara.
7)Mr. Jabr Al-Jabr (Representative of PPA in Sahara).
Reason for conflict of interest: PPA is a board member in Sipchem and Sahara, owns shares in both Sahara and Sipchem, and owns shares and is a manager in International Diol Company, an affiliate of Sipchem.
8)General Organization for Social Insurance ( GOSI ).
Reason for conflict of interest: Board member and shareholder in Sahara and manager and shareholder in International Diol Company, an affiliate of Sipchem.
9)Mr. Saleh Al-Wabil (Representative of GOSI).
Reason for conflict of interest: GOSI is a board member and shareholder in Sahara, and manager and shareholder in International Diol Company, an affiliate of Sipchem.
10)Mr. Tariq Al-Mutlaq (Representative of Al-Mutlaq Group).
Reason for conflict of interest: Al-Mutlaq Group is a board member in Sahara and shareholder in Sipchem and Sahara.
11)Mr. Khalid Al-Abdullatif (Representative of Ministry of Islamic Affairs in Sahara).
Reason for conflict of interest: The Ministry of Islamic Affairs is a board member and shareholder of Sahara and manager and shareholder of International Gases
Company, an affiliate of Sipchem.
12)Ministry of Islamic Affairs.
Reason for conflict of interest: Board member and shareholder of Sahara and manager and shareholder of International Gases Company, an affiliate of Sipchem.
None of the conflicted parties have voted on any resolution relating to the Proposed Merger, or will be a member of any of the committees responsible for conducting negotiations and completion of the Proposed Merger.

The Company will make further announcements in due course.