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Al-Ahlia for Cooperative Insurance Co. announces the signing of Memorandum of Understanding (MoU) with Gulf Union Cooperative Insurance Co. regarding the proposed merger between them

ALAHLIA 8140 1.10% 14.76 0.16

Further to the announcement made by Al-Ahlia for Cooperative Insurance. (the Company) on 02/06/1438H corresponding to 01/03/2017 regarding the initial understanding reached with Gulf Union Cooperative Insurance Co. (Gulf Union) to jointly consider the economic and technical feasibility of a proposed merger.
The Company announces that it has signed a memorandum of understanding (non-binding) with Gulf Union (the MoU) on 25/09/1438H corresponding to 20/06/2017 to begin financial, legal and actuarial due diligence and continue the non-binding negotiations relating to the detailed terms of the proposed merger between the two companies (the Proposed Merger).
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, the Proposed Merger is expected to be a positive transformational step in the business of the Company and improving its positioning in Saudi insurance sector.
The MoU has been signed by HRH Prince Muhammad Bin Bandar Bin Abdulaziz, Chairman of the Company, on behalf of the Company, and Mr. Abdulaziz Ali Al Turki, Chairman of Gulf Union, on behalf of Gulf Union, in the city of Riyadh.
In this regard, HRH Prince Muhammad Bin Bandar Bin Abdulaziz and Mr. Abdulaziz Ali Al Turki have jointly commented as follows: If the proposed merger completed, we hope that it 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 through either the market share or through the expected incentives that SAMA may provide to the combined entity. In addition, the proposed merger will reduce the operational costs and expenses for both companies, as well as improve the balance sheet and cash flow, which in return will enhance both companies future operational and investment efficiencies. The terms of the Proposed Merger will be underpinned by a shared commitment to achieve a fair result and create value for each company shareholders.
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 the Gulf Union. Under the terms of the Proposed Merger, Gulf Union will issue 0.5625 new shares for every one issued share in the Company subject to the satisfactory completion of financial, technical, tax and legal due diligence exercises by the Parties. Accordingly, based on the agreed exchange ratio, if the Proposed Merger is completed, the Gulf Union will issue 9,000,000 new shares to Company shareholders in exchange for all issued shares of the Company.
The MoU does not constitute an offer by Gulf Union to the Company 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 Gulf Union have agreed to continue to co-operate with each other to complete the financial, legal and actuarial due diligence, agree an integration plan, and the governance and strategy of the combined entity 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 the Gulf Union potential offer addressed to the Company 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 2018.The MoU will expire on the earlier of the date on which the Merger Agreement is signed by the companies and the date falling 20 weeks from date of the MOU. Either company may by 30 days written notice to the other terminate the MOU.
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 Saudi Arabian Monetary Authority (SAMA), Capital Markets Authority (CMA), the approval of the Council for Competition Protection, 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 Wasatah Capital as its financial advisor, Shearman & Sterling LLP in association with Dr. Sultan Almasoud & Partners as its legal advisor. Gulf Union has appointed Saudi Kuwaiti Finance House as its financial advisor, Al-Enezee in association with Holman Fenwick Willan LLP as its legal advisor.

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