Saudi Enaya Cooperative Insurance (Saudi Enaya) and United Cooperative Assurance (UCA) have announced the signing of a non-binding MoU to evaluate a potential merger.
The announcements were made separately by the two insurers and lodged with the stock exchange, Tadawul. Both companies will conduct technical, financial, legal and actuarial due diligence and engage in non-binding discussions on the terms and conditions of the potential merger.
The two companies have agreed that, in the event the proposed merger occurs, it will be implemented by way of a share swap where, after the proposed merger is completed, UCA will issue new shares to shareholders of Saudi Enaya in exchange for all issued shares of the latter.
Both parties have also initially agreed that the methodology used for valuation will be based on equity book value after any mutually agreed due diligence adjustments.
The swap ratio for shares of UCA for those of Saudi Enaya shall be calculated using the respective adjusted book value per share at a mutually agreed cut-off date.
The proposed merger is subject to the completion of due diligence to the parties’ satisfaction, agreement on final terms and conditions of the merger agreement and the approval of the competent authorities and the shareholders of each company.
UCA has appointed Alinma Capital as its financial adviser for the proposed merger. Saudi Enaya will appoint a financial adviser which will be announced later.
The financial advisers and other advisers involved in the due diligence and verification process are expected to evaluate the financial strength rating; performance record; product offerings; potential business opportunities; potential merger incentives, if any; compliance costs on account of existing contracts; employee retention; company location; and any other information and relevant adjustments that may have an effect on the carrying amount.
Saudi Enaya has been busy working on a likely merger. In January 2022, shareholders of Saudi Enaya rejected a proposal for the merger of the company with Amana Cooperative Insurance. The announcement of the feasibility of a merger was made in November 2020.
The insurer later cancelled its share capital by SAR50m ($13.3m), down to SAR100m. This was for a capital restructuring to amortise a part of accumulated losses amounting to SAR50m. The number of shares was slashed to 10m from the previous 15m.
In October 2022, Saudi Enaya announced a proposed rights issue of 13m shares. A number of 8,015,499 shares were subscribed out of the total number of 13m new shares. The value of the subscribed shares was SAR80,154,990. Unsold shares were allocated subsequently to the underwriter, Wasatah Capital.
On 1 December, Saudi Enaya announced the rump offering and the final allocation of rights issue shares. By the end of the rump offering period, the shares bid for totalled 4,984,501 or 100%. M