Sipchem hopes to sign $480mn sukuk issue in June

Cash could be used to finance potential acquisitions in the Kingdom

Sipchem is majority-owned by Saudi Arabia's Zamil Group.
Sipchem is majority-owned by Saudi Arabia's Zamil Group.

Saudi Arabia's petrochemical firm Sipchem is hoping to secure a $480mn sukuk issue in June which could be used to finance potential acquisitions in the Kingdom.

Ahmad Al Ohali, Sipchem CEO, told Reuters on Sunday the company would be open to reviving its merger with Sahara Petrochemicals or pursuing another acquisition target but only once the kingdom has changed the rules governing mergers and acquisitions.

The planned deal which, according to Bloomberg would have created a Saudi Arabian chemicals company with about $5.8bn in market value, was put on hold in June 2014 due to the Kingdom's hefty M&A regulations.

At the time the companies said it would be difficult to proceed with the merger under the current regulatory framework.

 

Aside from potential acquistions, Sipchem is looking at downstream opportunities in the Kingdom and plans to grow its footprint abroad, where it can take advanatage of local gas feedstock in countries like the US or be closer access to its customers, according to Al Ohali.

The firm is holding meetings with local investors in Jeddah and Riyadh this week about the sukuk transaction, Al Ohali said, adding that feedback from potential investors has so far proved positive. 

The Islamic bond, which is being arranged by Riyad Capital and NCB Capital, will be used to fund current business requirements as well as new opportunities, Al Ohali said.

Sipchem said in a bourse statement on Thursday it would use cash reserves to repay the existing Islamic bond on June 15.

"We believe we will be closing the sukuk in reasonable terms considering the current financial and banking market challenge."

"We hope by early June to conclude the pricing negotiations, book building and the whole transaction," Al Ohali told Reuters at the company's headquarters in Khobar located in Saudi Arabia's Eastern Province.

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