Riyadh – Mubasher: The Saudi Basic Industries Corp. (SABIC) on Sunday announced signing a memorandum of understanding (MoU) with Saudi Arabian Fertilizer Company (SAFCO).

The MoU signed on Thursday, 1 November "defines the principles of cooperation between the two parties regarding SAFCO's acquisition of SABIC's investments in the affiliates that produce agri-nutrients and some relevant products," SABIC said in a filing to the Saudi Stock Exchange (Tadawul).

Under the 18-month deal, SABIC will take the necessary steps to establish a wholly-owned limited liability company named SABIC Agri-Nutrients Investments Company.

The new firm will own and be responsible for SABIC's investments in the affiliates that produce agri-nutrients and some relevant products, SABIC explained.

After completing the transfer of ownership of the investments to SABIC Agri-Nutrients Investments Company, "both SABIC and SAFCO will arrange for an agreement on how to evaluate SABIC Agri-Nutrients Investments Company," the statement indicated.

The MoU will have no financial impact, SABIC stated, stressing that it was not "a final agreement on the potential deal."

It added that "in the event of an agreement between the two parties on the value of SABIC Agri-Nutrients Investments Company, SAFCO will make an offer to buy SABIC Agri-Nutrients Investments Company in cash or against issuing shares for SABIC in SAFCO by increasing its capital, or by both – after completion of the relevant regulatory approvals."

It is worth noting that SABIC and SAFCO also agreed on several basic principles and preconditions for implementing the transaction, including "conducting legal, financial and technical due diligence, appointing the competent consultants to do so, studying the evaluation, completing the contractual negotiations and obtaining the necessary preliminary approvals."

The MoU does not constitute an offer or a firm intention to make a presentation by SAFCO to SABIC, the companies said, noting that MoU was "a non-binding agreement entered into for the purpose of cooperation" between the two firms.

SABIC's stock last ended Thursday down 0.16% to SAR 126.60, while SAFCO's closed 0.24% higher to SAR 82.10.