RIYADH: Qassim Cement Co. has signed a non-binding memorandum of understanding with Hail Cement Co. regarding a securities exchange transaction, in which the former will acquire all of Hail’s issued shares.

Following the announcement, shares of Hail led the market’s gainers with a 8.02 percent increase at SR13.2 ($3.52), while Qassim Cement’s shares fell 2.93 percent at SR72.8.

Speaking to Arab News, analysts said this move was motivated by the strong and high demand for cement in the Kingdom in the near future.

“The huge and megaprojects such as NEOM and AMAALA projects need a lot of cement. Qasim plans to acquire all shares from Hail in preparation for any expansion in the cement market in future,” said Saudi economist Ali Alhazmi.

Abdullah Baeshen, a Riyadh-based economist, said that this move is an indication that both companies are looking to compete with other companies in the cement market.

“I think this will be an ideal factory version to enhance the government megaproject in central Saudi Arabia”, Baeshen said.

Accordingly, both parties will perform due diligence on the proposed transaction, as stated in a bourse filing.

Upon completion of the relevant financial evaluation and after consideration of the due diligence, Qassim and Hail will begin discussions on a non-binding exchange ratio.

Hail’s shareholders will receive 0.1933 newly issued shares in Qassim for each share they own in Hail.

Based on the exchange ratio, Qassim Cement will pay approximately 18.92 million newly issued shares of Qassim Cement to Hail Cement’s shareholders if the deal closes.

If the deal were to be completed based on the exchange rate, then each Hail Cement share would be valued at SR14.5, which represents a premium of 18.7 percent over the share price of Hail Cement as of Sept. 21, 2022, according to the statement.

In case the transaction proceeds, Qassim Cement will offer Hail Cement a share exchange offer in exchange for Hail Cement’s full acquisition.

Hail Cement will be delisted and become a wholly owned subsidiary of Qassim Cement, as per the merger and acquisition regulations.

Qassim Cement will notify the relevant authorities of any material developments relating to the transaction.