Sipchem Rise to Year High on Sahara Merger: Riyadh Mover

Saudi International Petrochemical Co. advanced the most in more than a year as it studies a merger with Sahara Petrochemical Co.

Sipchem, as Saudi International is known, gained 2.7 percent to 23.1 riyals, the highest since April 2012, at the 3:30 p.m. close in Riyadh. The stock was the fourth-biggest gainer on the benchmark Tadawul All Share Index, which advanced 0.5 percent. Sahara advanced 2 percent, the most since May 14, to 15.3 riyals. The shares have increased 13 percent this year, while Sipchem has climbed 21 percent.

The company said yesterday it will start a five-month feasibility study on a merger. With a market value of 8.47 billion riyals ($2.26 billion) and Sahara’s 6.7 billion riyals, the combination would be the nation’s largest deal in two years, according to data compiled by Bloomberg.

“There are cost and integration efficiencies that can be achieved by the merger,” Muhammad Faisal Potrik, an analyst at Riyad Capital, said in an e-mail. “It remains to be seen how the value created will be distributed among the existing shareholders of both companies.”

Seven analysts have a buy rating on Sipchem while four recommend investors hold the shares. One analyst advises investors buy Sahara shares, six recommend hold and one recommends sell, according to data compiled by Bloomberg.