Public Mergers and Acquisitions in Saudi Arabia Overview

Public Mergers and Acquisitions in Saudi Arabia: Overview, Practical Law Country Q&A...
Public Mergers and Acquisitions in Saudi Arabia: Overview

by Zeyad Khoshaim, Amro Bakhaidar, Ghaida Meaigel, Mohammad Almania, and Yazeed Alsayari, Khoshaim &
Associates
Country Q&A | Law stated as at 01-Jan-2022 | Saudi Arabia
A Q&A guide to public mergers and acquisitions law in Saudi Arabia.
The country-specific Q&A looks at current market activity; the regulation of recommended and hostile bids; pre-
bid formalities, including due diligence, stakebuilding and agreements; procedures for announcing and making an
offer (including documentation and mandatory offers); consideration; post-bid considerations (including squeeze-
out and de-listing procedures); defending hostile bids; tax issues; other regulatory requirements and restrictions;
and any proposals for reform.
M&A Activity
1. What is the current status of the M&A market in your jurisdiction?
The M&A market in Saudi Arabia has seen an increase over the past few years both in terms of volume and value. Part of this
increase is due to regulatory reforms that were introduced in 2019, which clarified the approval threshold for full acquisition
of shares or statutory merger and allowed many transactions to go forward. The financial sector has been the most active, with
banks and insurance companies comprising the majority of public M&A deals in recent years.
In Q1 2021, two public M&A deals were closed. This is the same as the total number of deals that were closed in 2020 and in
2019. All of these public M&A transactions were structured as either a:
• Share swap acquisition.
• Share swap statutory merger.
As of H1 2021, there are four public M&A transactions that have been publicly announced and still ongoing.
© 2022 Thomson Reuters. All rights reserved. 1

2. What have been the largest or most noteworthy sector-specific public M&A transactions in the past 12
months?
The largest public M&A transaction in the past 12 months was the merger between The National Commercial Bank and Samba
Financial Group, two listed banks, which closed on 1 April 2021. The National Commercial Bank (renamed as Saudi National
Bank (SNB) on closing), is now the largest bank in Saudi Arabia in terms of assets and the Middle East in terms of market
capitalisation. The consideration paid to Samba’s (the target and absorbed company) shareholders was SNB shares. The market
value of these shares at closing was over SAR78 billion.
In the past 12 months, two deals closed in the insurance sector:
• Gulf Union Cooperative Insurance Company's (Gulf Union) merger with Al Ahlia Cooperative Insurance (Al Ahlia)
closed in December 2020. Gulf Union (the surviving company) increased its capital, issuing 7.497 million new
ordinary shares with a par value of SAR10 per share to Al Ahlia the shareholders. The with market value of these
shares exceeded SAR164 million at closing.
• Aljazira Takaful Taawuni Company's (Aljazira Takaful) merger with Solidarity Saudi Takaful Company, closed in
February 2021. Aljazira Takaful (the surviving company) increased its capital, issuing 12.07 million new ordinary
shares with a par value of SAR10 per share. The market value of these shares exceeded SAR311 million at closing.
3. How were the largest or most noteworthy public M&A transactions financed?
All recent major public M&A transactions in Saudi Arabia were non-cash deals where the consideration was shares. No
financing was involved.
Obtaining Control
4. What are the main means of obtaining control of a public company?
There are number of possible means to obtain control over a public company as described in the M&A Regulations issued by
the Saudi Arabian Capital Market Authority (CMA). The main ones are as follows.
Private Sale Transaction

The bidder acquires shares directly from a shareholder, in a privately negotiated deal that does not involve the remainder of the
target’s shareholders or any form of public offer. The most prominent example of this is Saudi Arabian Oil Company's (Saudi
Aramco) acquisition of Public Investment Fund’s (PIF) 70% stake in the Saudi Basic Industries Corporation (SABIC).
Cash Tender Offer
The bidder makes a cash offer to acquire a certain number of shares in the target, and the offer is made publicly to all of the
target’s shareholders. There is no precedent of this in the modern regulatory regime.
Tender Offer Share Swap
The bidder makes an all-share offer to acquire 100% of the shares of the target. The offer is made to all of the target’s
shareholders and subject to the approval of the target and bidder's extraordinary general assemblies An example of this structure
is the acquisition by Saudi International Petrochemical Company’s (Sipchem) of 100% of the shares of Sahara Petrochemicals
Company.
Statutory Merger
The bidder makes an all-share offer to absorb the target. On closing, the target will cease to exist and its shares will be cancelled
(by force of law). All of the target's assets and liabilities will be transferred to the bidder (Article 192, Companies Law). The
offer is made to all of the target’s shareholders and subject to the approval of the target and bidder's extraordinary general
assemblies. Creditors have a statutory right to object to the merger within 30 days following the shareholders’ approval (Article
193, Companies Law). Should a creditor objects during this period, the merger will be suspended until the creditor is either paid
(if the debt is due) or is provided with a sufficient guarantee (if the debt is not due). An example of this structure is the merger
between the National Commercial Bank and Samba Financial Group (see Question 2).
Trends in Deal Structures
Recently, the statutory merger structure has been more prevalent. For example, all the recent M&A transactions between banks
and insurance companies were statutory mergers. This can mainly be attributed to the regulatory framework of these sectors
which does not permit a bank or an insurance company to de-list, become a private company, or be a subsidiary of another bank
or insurance company. However, when given the option, most companies opt for a tender offer share swap as it is faster and
does not give creditors a statutory right to object to the merger (unlike the statutory merger structure).
Hostile Bids
5. Are hostile bids allowed? If so, are they common?
The M&A Regulations do not regulate hostile bids/takeovers in detail. A bidder can tender an offer to the target’s shareholders
without the consent or support of the target’s board. However, the target company's board must provide the shareholders with
its opinion on the transaction (Article 39, M&A Regulations). This may make it difficult to implement a hostile bid in practice.

There have been no hostile takeovers in the Saudi Arabian market.
The target’s board is prohibited from taking any actions that will frustrate an offer and prevent the target’s shareholders
considering the offer and making a decision on its merits (Article 3, M&A Regulations).
Regulation and Regulatory Bodies
6. How are public takeovers and mergers regulated, and by whom?
Regulation
Public mergers and acquisitions are mainly regulated under the Merger and Acquisition Regulations issued by the CMA’s board
under resolution no. 1-50-2007 dated 21/09/1428H (corresponding to 3 October 2007 in the Gregorian calendar) as amended
from time to time (M&A Regulations).
In addition, where the bidder is a listed company and issues shares as consideration, the transaction will also be regulated by
the Rules on the Offer of Securities and Continuing Obligation issued by the CMA’s board under resolution no. 3-123-2017
dated 09/04/1439H (corresponding to 27/12/2017) as amended from time to time (ROSCOs).
Other laws and regulations, including the Companies Law and the Competition Law will also apply to public M&As.
Regulatory Bodies
The main regulators for a public M&A transaction are the:
• CMA. The CMA is the principal regulator and usually grants its approval only once it has received all other regulatory
approvals. The CMA approves public M&A transactions, including their timetable, the convening of the shareholders'
general assemblies, the capital increase (if the consideration is shares and the bidder is listed) and the shareholders'
documentation provided by both the bidder and target.
• Saudi Exchange. If the bidder is listed and the consideration is shares, the Saudi Exchange must approve the listing of
the new shares. It also approves de-listing applications (see Question 24).
• Ministry of Commerce (MOC). Although not an express requirement under the Companies Law, the MOC reviews
and approves any amendments to the bidder or target's bylaws.
• Depository Center Co. (Edaa). If the bidder is listed and the consideration is shares, the application for new shares
must be registered with the Edaa.
• General Authority for Competition (GAC). The GAC must approve any M&A transaction where the parties' (alone
or in aggregate) gross annual revenue exceeds SAR100 million. The majority of listed companies meet this threshold.
• Sector-specific regulators. Approvals from specific regulators may be required. For example, the Saudi Central
Bank’s (SAMA) approval is required for banks and insurance companies, the Ministry of Industry and Mineral

Resources' approval for industrial companies, and the Communications and Information Technology Commission's
approval for telecom companies.
If the parties have operations/subsidiaries outside of Saudi Arabia, international regulatory analysis must be conducted to
identify the international regulatory approvals required (for example, international antitrust filings).
Pre-Bid
Due Diligence
7. What due diligence enquiries does a bidder generally make before making a recommended bid and a hostile
bid? What information is in the public domain?
Recommended Bid
The due diligence process usually commences after the bidder and target sign a non-binding confidentiality agreement
or memorandum of understanding (MOU) enabling them to exchange information confidentially. Due diligence is usually
conducted and finalised before the definitive implementation/merger agreements (see Question 11, Implementation/Merger
Agreement) are executed and shareholders' documents are published.
In tender offer share swap and statutory merger deals, the due diligence is usually reciprocal. The bidder and target conduct
similar due diligence investigations (the target's to support their board recommendation to shareholders).
Due diligence includes:
• Legal due diligence, for example, a review of the company's employment contracts, material contracts, compliance
with statutory general and industry specific requirements, real estate, other aspects, or both, and any litigation involving
the company.
• Financial due diligence, including the financial statements of the company, its liquidity, how much it is leveraged, other
aspects, or all of these.
• Depending on the nature of the companies' activities commercial, technical, HR, and IT due diligence to identify
synergies and to plan for integration (if applicable).
Where the bidder is a listed company and the consideration is shares, Article 57 of the ROSCOs require the bidder to provide
the CMA with a legal and financial due diligence report, and a valuation report on the target.
Hostile Bid

No hostile bids have occurred in the Saudi Arabian market. This is most likely because there would be a lack of target co-
operation , due diligence would be limited to information in the public domain.
Public Domain
Listed companies are required to disclose information to the market. This includes:
• Annual and interim financial statements.
• Constitutional documents.
• An annual report about their activities and performance.
• Any material development in the context of their activities.
• Key litigation.
• Related-party transactions.
• Material transactions.
• Material indebtedness.
• Insolvency/liquidation issues.
• Details about the board, executive management, and board committees, for example names, renumeration policies, and
shareholdings.
• Information about shares including dividends distribution.
8. Are there any rules on maintaining secrecy until the bid is made?
Any person who has access to confidential information, especially information that is price sensitive, about a potential M&A
transaction must keep that information strictly confidential (Article 3, M&A Regulations).
However, there are no rules that prevent the bidder or the target company from making an announcement to the market before
the bid is made. In fact, the bidder and target are legally required to make an announcement to the public in certain circumstances
(for example, in the event of a leak or rumours) (Article 17(a), M&A Regulations).
Agreements with Shareholders

9. Is it common to obtain a memorandum of understanding or undertaking from key shareholders to sell their
shares? If so, are there any disclosure requirements or other restrictions on the nature or terms of the agreement?
The M&A Regulations do not prevent the bidder or target company from obtaining an undertaking from the key shareholders
to approve the transaction or sell their shares. The CMA must be notified before approaching any shareholder to obtain an
irrevocable commitment. If an irrevocable commitment is obtained, it must be disclosed to the public as part of the firm intention
announcement and the offer document. (Articles 17(e), 19(c) and 38, M&A Regulations).
It is common for the target company to approach key shareholders to obtain a non-binding statement of support for the
transaction or an informal agreement. It is not common to obtain an irrevocable commitment to approve the transaction.
The M&A Regulations require that all shareholders be treated equally in terms of any information regarding the offer. Sharing
confidential information with certain/key shareholders without sharing it with all shareholders is not permitted unless a waiver
is obtained from the CMA (Article 3(e), M&A Regulations). The CMA has granted a waiver before, and makes its decision on
a case-by-case basis. For example, the Saudi British Bank (SABB) obtained a waiver from the CMA from this requirement
to share certain information with certain key shareholders of SABB in the context of its offer to merge Al Awwal Bank into
SABB, as disclosed in the SABB’s offer document in 2019.
This is not applicable in a private sale transaction (which does not involve acquiring 100% control of the target) where all of
the negotiations and the share purchases occur between the buyer and a selling shareholder, without making an offer to the
other shareholders.
Stakebuilding
10. If the bidder decides to build a stake in the target (either through a direct shareholding or by using derivatives)
before announcing the bid, what disclosure requirements, restrictions or timetables apply?
Any person or entity that owns (or has an interest in) 5% or more of the voting shares or debt convertible to equity in any listed
company in Saudi Arabia (whether or not in the context of a public M&A transaction) must immediately disclose this to the
Saudi Exchange. (Article 67, ROSCOs). The Saudi Exchange publishes this information on its website.
Under the M&A Regulations, further restrictions and disclosure requirements apply to a bidder’s ownership/trading in the shares
of the target before and after the offer is formally made through the firm intention announcement (that is, the offer period has
commenced). For example, before the offer period:
• The bidder must announce its acquisition of shares in the target if this acquisition gives rise to an obligation to make a
mandatory offer (see Question 18) (Article 17(a), M&A Regulations).

• The bidder must make an announcement when it (alone or acting in concert with others) becomes an owner of 40% or
more of the target's voting shares. In addition, it cannot dispose of any these shares for six months (Article 17(a), M&A
Regulations).
• If the bidder has been stakebuilding through private sale transactions, it cannot trade in the target's shares during the
negotiations for and until the completion of these private sale transactions (Article 11, M&A Regulations).
• If the bidder attempted to build a stake through a private sale transaction but this transaction failed and the bidder
obtained confidential information during this process, then the bidder cannot deal in any way in the target's shares for
the six months following the announcement of the failure to complete the transaction (Article 11, M&A Regulations).
• The bidder’s trading in the shares of the target for the 12 months preceding the publication of the offer document must
be disclosed in the offer document.
At the sole discretion of the CMA, parties act in concert when:
• They actively co-operate, according to an agreement (whether binding or non-binding) or an understanding (whether
formal or informal).
• They control (whether directly or indirectly) a company. (This excludes indirect ownership of shares through swap
agreements or through ownership of a unit in an investment fund where the unit owners have no discretion in its
investment decisions.)
• Any of them acquires (direct or indirect ownership) of voting shares in that company.
(CMA Glossary of Defined Terms.)
Without prejudice to the general application of this definition, the following people or entities are presumed to be acting in
concert, unless the contrary is established, including but not limited to:
• Members of the same group.
• A person and their relatives.
• People or entities who provided financial assistance to the bidder, target, or members of the groups (other than a bank
in the ordinary course of business) to purchase shares that carry voting rights or convertible debt instruments.
(CMA Glossary of Defined Terms.)
In terms of restrictions and disclosure requirements applying during the offer period, that is after a firm intention announcement
is made (see Question 29).
Agreements in Recommended Bids

11.If the board of the target company recommends a bid, is it common to have a formal agreement between the
bidder and target? If so, what are the main issues that are likely to be covered in the agreement? To what extent
can a target board agree not to solicit or recommend other offers?
The bidder must present the offer to the target’s board (or the target’s advisers) before or at the latest at the same time the offer
is made to the target’s shareholders (Article 16, M&A Regulations). After the offer is made to the target’s shareholders and
before the extraordinary general assembly of the target shareholders is held to approve or reject the offer, the target’s board
must publish a shareholders’ circular (including information about the offer and the board’s recommendation) (Article 39, M&A
Regulations).
There have been no hostile bids in Saudi Arabia. To date, targets' boards have recommend bidders' offers to their shareholders,
and it is common to have a formal implementation/merger agreement. In addition, a one-step merger is more common and
clearly more effective compared to a front-end tender offer because the M&A Regulations do not provide a mechanism for the
compulsory cash purchase of minority investors' shareholdings.
Key Steps in a Public M&A Transaction
The key common steps of a public M&A transaction are:
• The parties conduct initial negotiations.
• The parties sign an NDA/MOU to commence due diligence.
• The parties conduct due diligence.
• The parties negotiate and agree on the definitive implementation/merger agreement (see below, Implementation/Merger
Agreement).
• The bidder makes the firm intention announcement (see Question 14).
• Application to CMA for approval of transaction timetable and draft offer document.
• The parties make regulatory filings, as required.
• The parties publish the shareholders' documents (see Question 15), that is, the bidder's offer document and the target
board's shareholders' circular.
• Each party holds an extraordinary general assembly to approve the offer.
• For a statutory merger, there is a 30-day period for the target's creditors to object to the merger.
• Closing.
Implementation/Merger Agreement
The implementation/merger agreement usually covers:
• Agreement to merge/acquire (including the company structure and bylaw amendments and the exchange ratio).

• Condition precedents (for example. regulatory approvals, general assemblies' approvals, key contractual and lenders'
approvals).
• Implementation of the merger/acquisition and the obligations of the parties (for example, the boards must publish
shareholders' documents and call the extraordinary general assemblies.). Generally, the parties agree that each board
will recommend the offer to its shareholders. However, an exception is usually made if the target’s board decides in
good faith that it should not recommend the offer or its recommendation should be amended or withdrawn.
• Conduct of business (what the parties cannot do during between signing the agreement and closing). This usually
includes material restructuring or business conduct that will materially alter or affect the companies' or the offer
valuations.
• For a statutory merger, the process to be followed if a creditor objects.
• Effective date and related action (for example, the required announcement).
• Governance and other post-closing matters (for example, board composition after closing, branding, and location of
headquarters).
• Integration (for example, of teams and committees and work protocols.
• Representations and warranties (for example, the information is accurate and no material issues are undisclosed).
• Circumstances in which the agreement can be terminated.
Exclusivity and no-shop restrictions are usually part of the first NDA/MOU signed between the parties and are common. In
particular, the parties agree not to negotiate another similar deal at the same time as the current transaction.
Break Fees
12. Is it common on a recommended bid for the target, or the bidder, to agree to pay a break fee if the bid is
not successful?
The bidder and the target can agree break fees provided that both:
• They obtain the CMA’s approval.
• The break fees are a specific amount and do not exceed 1% of the offer amount.
• They disclose the break fee to the market in the shareholders' documents.
(Article 36, M&A Regulations.)
Break fee agreements are not common practice although there are examples of them in some insurance company mergers. For
example, the Amana and Enaya merger which is still ongoing included a breakup fees.

Committed Funding
13. Is committed funding required before announcing an offer?
The bidder must only make an offer if it believes it has the resources to fulfil it (Article 3(f), M&A Regulations). In the firm
intention announcement, the bidder’s financial adviser must confirm that the bidder has sufficient resources to complete the
offer should it be fully accepted (Article 17(e), M&A Regulations).
Announcing and Making the Offer
Making the Bid Public
14. How (and when) is a bid made public? Is the timetable altered if there is a competing bid?
When the bidder firmly believes that it can, and will, continue and be able to complete the offer, it bidder must make the offer
public through a firm intention announcement (Article 17(a), M&A Regulations). The firm intention announcement contains,
among other things:
• Any conditions to the offer (for example, regulatory approval).
• Bidder's financial advisor's confirmation of funds to fulfil the offer.
• The identity of the bidder and anyone acting in concert with the bidder.
• The details of the bidder’s ownership in the target.
The firm intention announcement is generally made on the Saudi Exchange website.
The bidder must present the offer to the target’s board (or the target’s advisers) before or at the latest at the same time the offer
is made to the target’s shareholders.
After the firm intention announcement is made, the bidder must submit the offer timetable (along with the draft offer document
to the target’s shareholders) to the CMA. The bidder must publish the timetable and offer document within three days of
the CMA’s approval. The timetable contains the key steps of the offer and the expected timing of each step (for example,

the publication of the offer document and target’s board shareholders' circular, the convening of the general assemblies, and
closing). The majority of the steps have a specific timeframe mandated under the M&A Regulations.
The M&A Regulations impose a strict timetable for the bidder and target company to make disclosures and satisfy conditions.
The bidder must submit the timetable to the CMA within three days of making the firm intention announcement and the timetable
must adhere to the following stages:
• Once the CMA approves the offer document, the bidder must publish the offer document within three days from the
CMA’s approval. The expiry of this three days is referred to as T below.
• The target board must publish its circular to the target shareholders within T+14 days from the CMA approval.
• The bidder shareholders' approval (if applicable) must be obtained within T+28 days. The invite for the general
assembly must be published at least 21 days before the general assembly meeting date.
• The target shareholders' approval must be obtained within T+28 days. The invite for the general assembly must be
published at least 21 days before the general assembly meeting date.
• The earliest permitted closing date for the offer is no earlier than T+28 days.
• The right to withdraw of acceptance, if the offer has not become unconditional as to acceptances, is no later than T+14
days.
• The last date on which the target can announce profit or dividend forecasts, asset valuations, or proposals for dividend
payments is no later than T+60 days.
• The last date on which the bidder can revise its offer or publish new information is no later than T+60 days.
• The last date on which the offer can be declared unconditional as to acceptance is no later than T+60 days.
• The last date on which the offer must remain open for acceptance after it is declared unconditional as to acceptance, is
no earlier than 21 days from the step in the bullet above.
• The last date for satisfaction of all other conditions is no later than 21 days from the date on which the offer is declared
unconditional as to acceptance.
• The last date for cash or other consideration to be provided to the shareholders of the target is no later than ten days
from the step in the bullet above.
The M&A Regulations do not address altering the timetable in case of a competing bid, but state that if the bidder and/or the
target believe they cannot adhere to the timetable, they must notify the CMA and CMA may alter or approve the alteration of
the timetable (Article 17(c), M&A Regulations).
Offer Conditions

15. What conditions are usually attached to a takeover offer? Can an offer be made subject to the satisfaction
of pre-conditions (and, if so, are there any restrictions on the content of these pre-conditions)?
The M&A Regulations allow the bidder to attach conditions to its offer. The usual conditions precedent are to obtain required
regulatory approvals (see Question 6 and Question 27), shareholders’ approval and contractual third-party consents (for
example, lenders' consents).
The M&A Regulations do not regulate in detail the content of any pre-conditions. It is a commercial matter between the parties.
However, pre-conditions must be disclosed to the market as part of the transaction in the firm intention announcement and the
shareholders' documents.
Bid Documents
16. What documents do the target's shareholders receive on a recommended and hostile bid?
There are two main documents the target shareholders receive. (The regulations do not differentiate between recommended and
hostile bid for this requirement.) These are:
• The offer document. This is issued by the bidder and outlines, among other things:
• the offer;
• the basis of the valuation;
• the risk factors associated with accepting the offer;
• its plans for the target, including those for employees;
• information about the bidder and the target, for example, their activities; and
• both parties' major shareholders and their ownership before and after the offer.
• The target board of director's shareholders' circular. This includes information covering, for example:
• the offer;
• the risk factors associated with accepting the offer;
• its opinion on the bidder's plans for the target, including those for employees
• the board’s recommendation in relation to the offer; and

• a fairness opinion from the target’s financial advisers.
(Articles 38 and 39, M&A Regulations.)
Employee Consultation
17. Are there any requirements for a target's board to inform or consult its employees about the offer?
There is no requirement for the target’s board to consult the target’s employees about the offer. However, the bidder should
disclose any plans it has in relation to the target’s employees in the offer document and the target’s board (in the board’s
shareholders' circular) must provide its opinion about these plans.
Mandatory Offers
18. Is there a requirement to make a mandatory offer?
When a person or entity (alone or acting in concert) increases its ownership in a listed company to 50% or more of a certain
class of voting shares, the CMA has the right, but not the obligation, to mandate that person or entity (or those acting in concert
with them) to make an offer for the remainder of the company's shares (excluding treasury shares). For the definition of acting
in concert see Question 10. The CMA has never exercised this authority and mandated a public offer.
Consideration
19. What form of consideration is commonly offered on a public takeover?
To secure 100% control that is approved at the target's extraordinary general assembly (as opposed to each shareholder tendering
their shares), the consideration offered is the bidder's shares or possibly, although not tested under the modern regulatory regime,
a combination of shares and cash. If the consideration is cash, the M&A Regulations may be interpreted to require the tender

offer to be accepted by each and every shareholder. This is not practical in the context of public M&A given the large number
of shareholders, and those shareholders that do not attend and vote at general assemblies. To approve a merger where the
consideration is shares, the approval of shareholders representing 75% or more of the voting shares present at the extraordinary
general assembly is required.
The most common form of consideration offered in public takeovers is shares.
20. Are there any regulations that provide for a minimum level of consideration?
There are no regulations that provide for a minimum level of consideration. However, if the bidder (or any person or entity
acting in concert with the bidder) purchases shares in the target in the three months preceding the firm intention announcement,
then the offer price must not be lower than the purchase price during that period (Article 20(a), M&A Regulations). The CMA
may extend this to purchases made before the three-month period. In addition, in a cash or partially cash offer, the offer price
must not be lower than the highest purchase price the bidder paid if it traded in the target's shares in the 12 months prior to the
commencement of the offer period (Article 23, M&A Regulations).
21. Are there additional restrictions or requirements on the consideration that a foreign bidder can offer to
shareholders?
Foreign bidders could in theory offer cash consideration but this is not practical (see Question 19). The M&A Regulations do
not address a share offer by a foreign bidder. This has not yet occurred. Therefore, foreign bidders are advised to discuss this
possibility with the CMA which may impose certain restrictions. Foreign ownership in Saudi Arabian companies is regulated
and is subject to a number of conditions and requirements under the relevant rules and regulations.
Post-Bid
Compulsory Purchase of Minority Shareholdings
22. Can a bidder compulsorily purchase the shares of remaining minority shareholders?

Generally, compulsory cash purchase is not permitted under the M&A Regulations. The mechanism to obtain 100% control
(through purchasing of all the target's shares or merging the target into the bidder) is the tender offer share swap or statutory
merger, where the consideration in both is shares (see Question 4).
In these structures, the offer is fully accepted if 75% of the shares in attendance at the extraordinary general assembly approve
it. This means the bidder will squeeze up the target shareholders even if they did not vote in favour of the offer.
Restrictions on New Offers
23. If a bidder fails to obtain control of the target, are there any restrictions on it launching a new offer or buying
shares in the target?
There are no provisions in the M&A Regulations, that prevent a bidder from launching another offer if the first offer fails.
However, any person or entity, including the bidder, that has (or had) access to non-public price sensitive information about
the target should not trade or recommend anyone else to trade in the target’s shares before this information becomes public.
De-Listing
24. What action is required to de-list a company?
The company must submit an application to de-list to the CMA (including the reasons for the de-listing and certain required
declarations) accompanied by a notification to the Saudi Exchange.
After obtaining the CMA's approval, the company must obtain its extraordinary general assembly's approval to de-list. In an
M&A transaction, there is generally no need to follow this process separately. The CMA’s de-listing approval is given when
they approve the offer timetable and offer document (see Question 14) and the shareholders given when they approve the offer.
The CMA can also de-list a company (without an application) in certain circumstances, for example, if the company fails to
satisfy the continuing listing obligations including the required percentage of free float and public ownership.
Target's Response

25. What actions can a target's board take to defend a hostile bid (pre- and post-bid)?
The target’s board is prohibited from taking any actions that will frustrate an offer and not allow the target’s shareholders to
consider the offer and make a decision in its merits (Articles 3(j) and 36, M&A Regulations).
Although there are no precedents, there is no prohibition on measures prior to offers being made that are not directly aimed at
frustrating an offer, for example, staggered boards.
Tax
26. Are any transfer duties payable on the sale of shares in a company that is incorporated and/or listed in the
jurisdiction? Can payment of transfer duties be avoided?
Transfer duties are not applied to the transfer of shares. However, capital gains, withholding taxes, VAT, and brokerage charges
may apply.
Other Regulatory Restrictions
27. Are any other regulatory approvals required, such as in relation to merger control, foreign ownership or
specific industries? If so, what is the effect of obtaining these approvals on the public offer timetable?
For a list of the required approvals, see Question 6.
One key approval is the approval of the General Authority for Competition (GAC). The GAC’s approval must be sought
before any economic concentration, which includes acquisitions or the merger of two entities, where the parties involved have
aggregate revenue over SAR100 million. This threshold is generally always triggered in public M&A.
Foreign ownership in Saudi Arabian companies is regulated and is subject to a number of conditions and requirements under
the relevant rules and regulations including Foreign Investment Law.
There have been no publicly announced public M&A transactions blocked by the regulators or approved subject to conditions
or restrictions.

28. Are there any restrictions on repatriation of profits or exchange control rules for foreign companies?
Withholding tax applies to profit or income non-residents earn in Saudi Arabia.
29.Following the announcement of the offer, are there any restrictions or disclosure requirements imposed on
persons (whether or not parties to the bid or their associates) who deal in securities of the parties to the bid?
There are a number of restrictions that apply to the bidder, target, and their advisers during the offer period (from the firm
intention announcement and until the offer is approved, rejected, or withdrawn). These include, but not limited to the following.
Bidder's Disclosure
The bidder (and any concert parties) cannot:
• Sell any of the target's shares without the CMA's approval.
• If the bidder is a listed company, trade in the bidder’s shares, if they are in possession of price-sensitive information in
relation to the bidder.
The bidder (and any concert parties) must disclose, within three trading days:
• Any trade for its own account in the target and/or the bidder's shares (if the bidder is a listed company) to the public.
• To the CMA any trades for the account of clients, if applicable, in the shares of the target and/or the bidder.
In addition, if the bidder traded in any of the target's shares before the offer was announced, the bidder may be required to
amend the offer price (see Question 20).
Target's Disclosure
The target (and any concert parties) must disclose, within three trading days:
• Any trade for its own account in the target and/or the bidder's shares (if the bidder is a listed company) to the public.
• Any trades for clients' accounts, if applicable, in the shares of the target and/or the bidder to the CMA.

Target’s Advisers and Group Companies
The target's advisors and group companies are not permitted to purchase the target’s shares.
In addition, insider trading rules generally prohibit any person or entity that is aware of any non-public price-sensitive
information from trading in a listed company or recommending a third person or entity trade in those shares.
Future Developments
30. What do you think will be the main factors affecting the public M&A market over the next 12 months, and
how do you expect the market to develop?
We are optimistic that there will be a further increase in the number and volume of public M&A transactions in the Saudi
Arabian market, with more listed companies considering public M&A as a mechanism for growth and/or optimising their
returns, operations, and market position.
Reform
31. Are there any proposals for the reform of takeover regulation in your jurisdiction?
The CMA and other regulators aim to continuously reform the regulatory framework to enhance transparency and efficiency.
These reforms follow a public participation process where market participants are invited to comment and provide their input.
We have been worked closely with the CMA and the MOC on reform initiatives.
Contributor Profiles
Zeyad Khoshaim, Managing Partner
Khoshaim & Associates

E zeyad@khoshaim.com
W www.khoshaim.com

Professional and academic qualifications. New York, California, Washington DC, and Saudi Arabia qualified
lawyer; Bachelor of Engineering, Vanderbilt University; Doctor of Jurisprudence, Vanderbilt University Law
School; Leadership in Law Firms Executive Education program, Harvard University Law School.
Areas of practice. Public M&A; corporate; capital markets; dispute resolution; finance and projects; regulation
and legislative
Recent transactions
• Saudi Aramco on its IPO in relation to Saudi regulatory matters.
• Samba Financial Group on its merger with the National Commercial Bank.
• Saudi International Petrochemical Company (Sipchem) on its USD5.7bn merger with Sahara
Petrochemicals Company.
• Saudi Arabian Basic Industries Corporation (SABIC) in relation to the acquisition by Saudi Aramco of
70% of its shares from the Public Investment Fund.
• Advising Royal Bank of Scotland as the major shareholder in connection with AlAwwal/SABB merger.
• National Medical Care Company in relation to its IPO.
• J.P. Morgan as financial adviser to Saudi National Shipping Company on the acquisition of Vela
International Marine.
• Morgan Stanley on the Marai/Hadco merger.
Languages. Arabic and English.
Amro Bakhaidar, Counsel

E amro.bakhaidar@khoshaim.com
W www.khoshaim.com
Professional and academic qualifications. Saudi qualified lawyer; LLM in International Commercial Law,
University of Nottingham; LLB, University of Essex
Areas of practice. Equity and debt capital markets; public M&A; IPOs; investment funds
Recent transactions
• The Saudi British Bank (SABB) on its statutory merger with Alawwal bank.

• NatWest Markets plc and Banco Santander S.A. in their USD682.58 million disposal of shares in SABB
by way of an accelerated bookbuild.
• Bank Aljazira on its rights issue.
• AXA Cooperative Insurance on its rights issue.
• Saudi Ground Services as issuer in relation to its SAR1.8 billion IPO.
• Amazon in relation to its acquisition of Souq.com.
• HSBC as financial advisor to SACO in relation to its IPO.
Languages. Arabic, English
Ghaida Meaigel, Associate

E ghaida.meaigel@khoshaim.com
W www.khoshaim.com
Professional and academic qualifications. Saudi and New York qualified lawyer. Bachelor of Laws, Prince
Sultan University (First Honors); Master of Laws, University of Pennsylvania Carey Law School (Distinction);
Wharton Business and Law Certificate from the Wharton School.
Areas of practice. Public M&A; equity capital markets; economic regulations; financial/securities disputes
Recent transactions
• Saudi Arabian Basic Industries Corporation (SABIC) in relation to the acquisition by Saudi Aramco of
70% of its shares from the Public Investment Fund.
Mohammad Almania, Associate

E mohammad.almania@khoshaim.com
W www.khoshaim.com

Professional and academic qualifications. New York and Washington DC qualified lawyer. Juris Doctor (J.D.),
Syracuse University College of Law; Bachelor of Laws (LL.B), Prince Mohammad Bin Fahd University.
Areas of practice. Equity and debt capital markets; public M&A; corporate governance.
Recent transactions
• HSBC Saudi Arabia and Samba Capital Investment & Management Company in relation to ACWA
Power’s SAR2.8 billion sukuk issuance.
• Saudi Electricity Company (SEC) on its USD 1.3 billion debut green sukuk.
Yazeed Alsayari, Associate

E yazeed.alsayari@khoshaim.com
W www.khoshaim.com
Professional and academic qualifications. Bachelor of Laws (Honors), Prince Sultan University
Areas of practice. Capital market; private and public M&A; corporate compliance and governance; commercial
structuring.
Recent transactions
• Saudi Aramco on its IPO in relation to Saudi regulatory matters.
END OF DOCUMENT
Related Content
Topics

Cross-border - Acquisitions
Practice notes
Regulatory and competition issues: takeovers • Maintained
Due Diligence for Public Mergers and Acquisitions • Maintained
Employment issues on a takeover • Maintained
Checklists
M&A Integration Checklist • Maintained
COVID-19 Issues in Public M&A Transactions Checklist • Law stated as at 31-Dec-2020

Public Mergers and Acquisitions in Saudi Arabia Overview

Uploaded by

Document Information

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Public Mergers and Acquisitions in Saudi Arabia Overview

Uploaded by

Copyright:

Available Formats

Public Mergers and Acquisitions in Saudi Arabia: Overview, Practical Law Country Q&A...

Public Mergers and Acquisitions in Saudi Arabia: Overview

Country Q&A | Law stated as at 01-Jan-2022 | Saudi Arabia

A Q&A guide to public mergers and acquisitions law in Saudi Arabia.

1. What is the current status of the M&A market in your jurisdiction?

• Share swap acquisition.

• Share swap statutory merger.

© 2022 Thomson Reuters. All rights reserved. 1

In the past 12 months, two deals closed in the insurance sector:

4. What are the main means of obtaining control of a public company?

Private Sale Transaction

© 2022 Thomson Reuters. All rights reserved. 2

Cash Tender Offer

Tender Offer Share Swap

Trends in Deal Structures

5. Are hostile bids allowed? If so, are they common?

© 2022 Thomson Reuters. All rights reserved. 3

There have been no hostile takeovers in the Saudi Arabian market.

Regulation and Regulatory Bodies

6. How are public takeovers and mergers regulated, and by whom?

The main regulators for a public M&A transaction are the:

© 2022 Thomson Reuters. All rights reserved. 4

Due diligence includes:

© 2022 Thomson Reuters. All rights reserved. 5

• Annual and interim financial statements.

• An annual report about their activities and performance.

• Any material development in the context of their activities.

• Information about shares including dividends distribution.

Agreements with Shareholders

© 2022 Thomson Reuters. All rights reserved. 6

© 2022 Thomson Reuters. All rights reserved. 7

At the sole discretion of the CMA, parties act in concert when:

(CMA Glossary of Defined Terms.)

• Members of the same group.

• A person and their relatives.

(CMA Glossary of Defined Terms.)

Agreements in Recommended Bids

© 2022 Thomson Reuters. All rights reserved. 8

Key Steps in a Public M&A Transaction

The key common steps of a public M&A transaction are:

• The parties conduct initial negotiations.

• The parties sign an NDA/MOU to commence due diligence.

• The parties conduct due diligence.

• The parties make regulatory filings, as required.

• Each party holds an extraordinary general assembly to approve the offer.

The implementation/merger agreement usually covers:

© 2022 Thomson Reuters. All rights reserved. 9

• For a statutory merger, the process to be followed if a creditor objects.

• Integration (for example, of teams and committees and work protocols.

• Circumstances in which the agreement can be terminated.

• They obtain the CMA’s approval.

(Article 36, M&A Regulations.)

© 2022 Thomson Reuters. All rights reserved. 10

13. Is committed funding required before announcing an offer?

Announcing and Making the Offer

Making the Bid Public

• Any conditions to the offer (for example, regulatory approval).

• Bidder's financial advisor's confirmation of funds to fulfil the offer.

• The details of the bidder’s ownership in the target.

© 2022 Thomson Reuters. All rights reserved. 11

© 2022 Thomson Reuters. All rights reserved. 12

• the basis of the valuation;

• the risk factors associated with accepting the offer;

• its plans for the target, including those for employees;