Saudi Basic Industries Corporation (SABIC) and Kayan Petrochemicals Company have signed an initial Memorandum of Understanding (MoU) appointing SABIC as a partner in Kayan Petrochemicals Company project.
According to the MoU, SABIC is required to review all works, studies, agreements and update the respective feasibility study in no later than two months. "The two parties will enter into a final agreement should they agree upon the results", according to a Press release issued by SABIC.
SABIC is reported by Al Iqtisadiya to be planning to acquire a stake of SR 3.8 billion (about $1 billion) in Kayan.
"The SR 3.8 billion will become part of Kayan's capital which will amount to SR 10 billion," the source said. Kayan was established last year with a paid-up capital of SR 3.2 billion.
In addition to SABIC's contribution to capital, the company plans to raise SR 3 billion by offering shares to the public through an IPO. The company was formed with the objective of establishing petrochemical manufacturing plants in the Jubail 2 industrial city.
Kayan had nursed plans for an IPO at the time of its launching last year. It postponed these plans as it cancelled capital contributions by a group of founding investors reported in Saudi media to number 100 individuals. The amounts were returned and a court in Riyadh in September rejected a case brought against Kayan by one of these investors.
The partnership with SABIC will empower the market stamina of Kayan and will create new opportunities for the two companies, Mr. Khaled Al Muqairin, one of Kayan's founders.
The Saudi Ministry of Commerce and Industry provided Kayan Petrochemicals in July 2005 with a license as a Saudi closed joint stock company.
Founding members in the venture included 23 companies and institutions such as Gassim Agricultural Company (GACO) and Yamama Saudi Cement Company.
© Saudi Commerce and Economic Review 2006
