Saudi Enaya, Salama sign MoU to assess merger feasibility

Logo of Saudi Enaya Cooperative Insurance Co. 

Saudi Enaya Cooperative Insurance Co. and Salama Cooperative Insurance Co. signed today, Feb. 25, a non-binding memorandum of understanding (MoU) to evaluate the feasibility of their potential merger.

In two separate statements to Tadawul, both companies said they will commence their due diligence, covering operational, technical, financial, legal, and actuarial aspects. They will also engage in non-binding discussions on the terms and conditions (T&Cs) of the proposed merger transaction.

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In its statement, Saudi Enaya clarified that if a binding merger agreement is signed and the necessary regulatory and shareholder approvals are obtained, the merger will be executed through a share swap. In this case, the surviving legal entity (the resulting entity) will issue new shares to the shareholders of the merged entity, assuming all its rights and obligations.

The share swap ratio between Saudi Enaya’s and Salama’s shareholders will be determined after completing all necessary due diligence requirements in the satisfaction of all parties involved.

The MoU, according to Saudi Enaya, will expire upon the earliest occurrence of any of these events: the signing of a merger agreement between Saudi Enaya and Salama, the expiration of the exclusivity period stated in the MoU (12 months from the signing date), a mutually agreed-upon written agreement between both companies to terminate the MoU, or either company providing written notice of termination to the other party at any time after five months from the MoU’s execution date.

Additionally, the Saudi insurer vowed to announce any material developments in the proposed merger, as per the relevant laws and regulations. In the meantime, it intends to continue doing business as usual until the merger process is finalized.

It emphasized that the planned merger remains subject to the completion of due diligence to the satisfaction of all parties involved, the finalization of the merger agreement’s T&Cs, and the receipt of the necessary regulatory and shareholder approvals.

In its statement, Salama said it will disclose the appointment of its financial advisor for the potential transaction once selected. Likewise, Saudi Enaya will announce the appointment of its financial advisor for the proposed deal once confirmed.

Salama stated that the MoU will remain in effect from the signing date until the completion of the potential merger transaction, the termination of negotiations by either party, or the expiry of the one-year deadline from the signing date — whichever comes first.

As for the merger agreement’s terms, Salama outlined several key points agreed upon with Saudi Enaya under the MoU.

If the potential deal proceeds, it will be executed through a merger in which Salama will be the surviving entity, while Saudi Enaya will be the merged entity. This will be carried out through a share swap, with Salama increasing its capital by issuing new shares to Saudi Enaya’s shareholders, based on a predetermined swap ratio.

Under the MoU, both companies have also agreed to negotiate conclusive terms for the potential merger, which will define the commercial terms related thereto, including the final governance structure and share swap ratio.

Additionally, the MoU mandated several standard provisions that are enforced typically under such agreements. These provisions cover confidentiality, trading restrictions, and other relevant matters to ensure transparency and seamless progression of the deal.

Salama emphasized that the execution of the potential merger is subject to both companies reaching a binding final agreement defining its T&Cs. This agreement will require obtaining all necessary regulatory approvals, as well as approval from the extraordinary general meetings (EGMs) of both companies.

Therefore, the MoU signing does not necessarily mean that the parties will reach a final and binding agreement regarding the potential deal, nor does it guarantee that the deal will be completed.

Saudi Enaya also confirmed that sealing this MoU should not imply that both companies have agreed to proceed with the proposed merger.

According to data available with Argaam, Saudi Enaya holds SAR 230 million in capital, divided into 23 million shares. Meanwhile, Salama boasts a capital of SAR 300 million, divided into 30 million shares.

In December 2023, Saudi Enaya’s shareholders rejected a merger with United Cooperative Assurance Co. (UCA).