Gulf Union, Al Ahlia ink non-binding deal for potential merger

Gulf Union Cooperative Insurance Co. and Al Ahlia for Cooperative Insurance signed on Tuesday a non-binding agreement to start due diligence for a potential merger, both companies said in separate statements.

The two insurers agreed that the merger will be closed via a share swap deal, under which Al Ahlia will turn into a subsidiary of Gulf Union.

Gulf Union will issue 0.5625 new shares for every issued share in Al Ahlia.

When the merger is completed, Gulf Union will issue 9 million new shares to Al Ahlia shareholders in exchange for all issued shares in that company.

Accordingly, total issued shares of the merged entity will stand at 24 million, with SAR 240 million in capital.

The two companies added that in case an agreement is reached on the planned merger, Gulf Union will submit a bid for Al Ahlia shareholders.

The due diligence process is expected to be finalized in H1-2018.

Meanwhile, both companies will continue their operations and trading on the Saudi bourse normally until the merger is completed.

The preliminary agreement was signed as initial signs of the potential merger pointed to a positive shift for the insurers’ business, which will bolster their position in the local insurance market.

The non-binding agreement could be terminated upon mutual agreement or after 20 weeks from the signing date, the statements added.

Any of the two companies may also terminate the preliminary agreement by notifying the other party 30 days before the termination.

The planned merger is still subject to the approval of the Saudi Arabian Monetary Authority (SAMA), Capital Market Authority (CMA), shareholders of both firms and the competent government authorities.

Gulf Union had earlier appointed Saudi Kuwait Finance House and Al-Enezee in association with Holman Fenwick Willan as its financial and legal advisors, respectively for the merger, Argaam reported.