Long-held plans to merge two key Saudi petrochemicals companies have finally been agreed, with Saudi International Petrochemical Company (Sipchem) and Sahara Petrochemical set to merge in the middle of 2019.

The two companies have been in talks for a number of years, having shelved the plan in 2014 amid lower global petrochemicals revenues. They revived their discussions in October with the signing of a non-binding memorandum of understanding (MoU).

A binding agreement was finally signed on 6 December to implement the merger, with Sipchem acquiring shares in Sahara, the company announced on the Saudi stock exchange. 

Once the acquisition is complete, which is expected by the end of June 2019, all of Sahara’s shares on the Tadawul exchange will be delisted, and Sahara will become a wholly owned subsidiary of Sipchem.

With a combined market capitalisation of approximately SR14.8bn ($3.95bn), the new company will be the sixth-largest petrochemicals firm in the kingdom, behind PetroRabigh, Saudi Kayan, Saudi Fertiliser Company, Yansab and Saudi Basic Industries Corporation.

The new combined company, Sahara International Petrochemicals Company, will still be known as Sipchem. It will continue to be led by Sipchem chief executive Ahmed Alohali, while Sahara’s Saheh Bahamdan will become the operations manager.

The two companies share their two largest shareholders – Zamil Holding Group, a family business, and the government’s Public Pension Agency.

Both companies have production complexes at Jubail on Saudi Arabia’s Gulf coast, with Sipchem focused on methanol-based chemicals and Sahara on polypropylene. They are now looking to expand their product slates to push further downstream, and create a platform with improved financial resources, capital market access, and product and technological expertise.