DUBAI, June 18 Saudi International Petrochemical
Co (Sipchem) has picked HSBC Holdings to
advise on the firm's proposed merger with Sahara Petrochemical
, three banking sources said on Tuesday.
Mergers between two listed Saudi entities are rare:
consolidation in the Gulf is often scuppered by major
shareholders who are unwilling to cede control of businesses
except for very high price tags.
However, both Sipchem and Sahara have Zamil Holding Company
Group, one of the kingdom's most prominent family businesses, as
a key stakeholder.
The two companies had said earlier this month that they were
in initial talks for a tie-up.
Sahara has yet to select an adviser while Sipchem has chosen
HSBC, which has advised the firm on projects in the past, two of
the bankers said.
Calls to a Sipchem spokesman went unanswered, while HSBC
declined to comment.
While no value has been given for the proposed merger, the
combined market capitalisation of both firms at the end of
Monday was around $3.8 billion. Total assets at the end of March
stood at 15.2 billion riyals ($4.1 billion) and 8.6 billion
riyals for Sipchem and Sahara respectively.
A tie-up between the two would give the combined entity a
greater product range, as Sahara produces basic petrochemicals
and Sipchem focuses on more high-value products, said Muhammad
Faisal Potrik, research analyst at Riyad Capital.
"It would also increase their purchasing power to reduce raw
material costs and they could penetrate the market better," he
Zamil, which has interests in petrochemicals, steel,
housing, construction and other industrial sectors, owns 7.9
percent of Sahara and 9.6 percent of Sipchem. The government
pension fund also has holdings of more than 5 percent in both
($1=3.7504 Saudi riyals)
(Reporting by Dinesh Nair and David French; Additional
Reporting by Nadia Saleem; Editing by Ruth Pitchford)