Riyadh, Asharq Al-Awsat—Saudi Arabia on Monday announced the conclusion of due diligence measures for its biggest private sector corporate merger to date, valued at 4.8 billion Saudi riyals (1.3 billion US dollars).
The deal, between the National Shipping Company of Saudi Arabia (Bahri) and the Saudi Aramco-owned crude oil tanker company Vela International Marine Limited (Vela), will create the world’s fourth-largest oil shipping fleet.
Bahri Chief Executive Saleh Al-Jasser said the merger will increase Bahri’s oil fleet of giant oil tankers to 31, after adding the 14 tankers from Vela’s fleet to the 17 already owned by Bahri, raising its share of the world’s shipping market—which he said consists of some 640 giant tankers—to five percent.
Bahri will now become the exclusive provider of crude oil shipping services for Aramco, Saudi Arabia’s state-owned oil and gas company.
The merger—first announced in November 2012—will see Bahri pay 3.1 billion riyals (8.3 million dollars) in cash and issue 7.87 million shares valued at 22.25 riyals (5.9 dollars) per share via a capital mechanism—Saudi Vela–Aramco—allowing it to acquire 20 percent of Bahri’s capital.
Jasser said the deal includes the transfer of assets and staff, as well as ships, and said it represented a “quantum leap” for Bahri, which would motivate the company to achieve higher returns for its shareholders, in addition to reducing its exposure to fluctuating freight volumes and diversifying its investment portfolio.
Jasser also said the deal would open more avenues of cooperation between Bahri and Aramco for the transport of chemicals and bulk cargo, as well as logistical operations, adding that this would have a positive impact on the financial and commercial status of the company due to the increase in the volume of transported goods the company would now be handling.
Bahri has signed a non-binding financial Memorandum of Understanding to acquire a bridging loan of 3.1 billion riyals (826 million dollars) with JP Morgan Chase, the Samba Financial Group and the Saudi British Bank in order to finance the cash offer and the expenses related to the deal, Jasser said. He added that the company intended to repay the loan through bond issues or via long-term Shari’a-compliant facilities.
Bahri is now awaiting agreement of its Extraordinary General Assembly on Thursday, in line with Saudi stock market regulations and the country’s Companies Law to officially conclude the merger.
Saudi financial market regulations require that 50 percent of Bahri’s company shareholders participate in the vote to ratify the agreement, with a “Yes” vote of 75 percent required for any merger deal within the petroleum sector.
Saudi Companies Law allows for the number of board members to be increased from seven to nine in the event of a merger, in addition to two members who can be added to the board upon the delivery of payment shares.
Bahri said no changes would be made to the name of the company or its executive management team.