Elm inks deal to acquire PIF’s Thiqah for SAR 3.4B

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Elm Co. signed on Jan. 21 a share sale and purchase agreement (SPA) with the Public Investment Fund (PIF) allowing the Tadawul-listed firm to acquire the fund’s entire stake of 45,000 shares or 100% of Thiqah Business Services Co. for SAR 1,000 per share.

The deal is valued at SAR 3.4 billion (less some costs and expenses related to the acquisition deal), to be paid by Elm to PIF, according to a statement to Tadawul.

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The SPA includes customary terms and conditions and fundamental warranties given by each party.

The acquisition will be subject to relevant regulatory approvals and a sanction from Elm’s shareholders, due to the indirect interest of some board members.

These include Raed Ismail (a senior employee at PIF) and Abdullah Al-Salem (a board member at Thiqah).

The deal also requires the satisfaction of other approvals and conditions, in accordance with the SPA.

Elm said it will finance the consideration fully in cash through its own resources and facilities.

Thiqah is a leading end-to-end digital solutions company, offering a wide range of smart solutions based on customized and ready-made digital platforms.

The acquisition supports Elm’s growth ambitions and will reinforce its position as a national provider in the digital services space, the statement said. It is expected that the acquisition will result in value creation and result in continued growth by accessing high growth accounts allowing Elm to offer complementary services to its client base, the statement added. This is expected to have a positive impact in the future.

At completion of the acquisition, Thiqah will be wholly-owned by Elm.

The financial statements of Thiqah will be consolidated within Elm’s financial statements post-transaction.

Given that the acquisition is classified as a transaction between parties under common control, the accounting treatment of the acquisition will be based on the value of the net asset acquired at its book value as of the acquisition date. Therefore, the difference between the consideration paid and the book value will be treated in the retained earnings account, which will result in a decrease in the retained earnings account by the value of that difference and will be reflected in Elm’s first financial statements after the completion of the deal, the Saudi-listed firm noted.

This is based on the International Financial Reporting Standards (IFRS) that are endorsed in Saudi Arabia and other standards and pronouncements issued by the Saudi Organization for Chartered and Professional Accountants (SOCPA).

This procedure is of an accounting nature, and does not have any impact on the company’s business plans, Elm indicated.

As a major shareholder in Elm, the PIF remains a related party to the deal along with board members Ismail and Al-Salem.

The company will announce any material developments in respect of the deal, as required in accordance with the relevant rules and regulations, the statement further noted.

Elm has appointed HSBC Saudi Arabia as the financial adviser in relation to the acquisition, and AS&H Clifford Chance Law Firm as the legal adviser.

According to data compiled by Argaam, Elm announced in 2023 engaging in preliminary talks with Thiqah to buy the PIF’s entire ownership.