RIYADH/JEDDAH, 8 September 2006 — The Saudi International Petrochemical Company (Sipchem), one of the largest private petrochemical companies in the Middle East, launched yesterday its Initial Public Offering by making available 30 percent of its capital available to the public by issuing 45 million shares.
The IPO, which will start from Sept. 9 to 18, was organized by the National Commercial Bank, which is acting as the financial adviser, lead manager and lead underwriter. Sipchem’s IPO is said to be the second largest offering in the Saudi market in the past three years.
“The price of one Sipchem stock was evaluated at SR 55, including the premium, making the total value of the IPO SR2.475 billion. The IPO will take place through the branches and ATM machines of the various banks in the country,” Abdul Aziz Al-Zamil, chairman of Sipchem, announced at a press conference.
Earlier, Ahmed A. Al-Ohali, president of Sipchem, signed the underwriting agreements with NCB and five other major local banks involved in the IPO. The amount raised through the subscription would be mobilized for the company’s expansion program.
Speaking to Arab News, Al-Zamil said the company had performed well and generated a net profit of SR220 million for the first six months of this year. This compared with SR175 million for the same period last year.
Abdulkareem Abu Alnasr, the chief executive officer of the National Commercial Bank, indicated that preparations for the IPO lasted around one year, during which various detailed financial analyses had confirmed the strong financial standing of Sipchem and the fair value of its premium.
Founded on Dec. 22, 1999, the company, which is a major player in the basic and intermediate petrochemical industry, started with a capital of SR500 million which tripled to SR1.5 billion last year. It produces one million tons of methanol, a chemical used in manifold applications like wood products, resins, gasoline additives, as well as films, fibers and polyester.
In addition, it owns the first butanediol plant in the Middle East, another chemical used in vinyl fabric coating, floor polishing, pesticides, as well as in a wide range of parts for the automotive and packaging industries.
Asked about the initial subscription price which was considered to be high, Al-Zamil, said: “I believe it’s a fair price, and some board members see it lower than their expectation.” He observed that the company had put in strong performance, with assets of SR4.8 billion, shareholders equity at SR2.1 billion, while it earned SR 219million for the first half of this year.
“The initial price discounted to its current level because of the stock market crash of February. If the offering had happened a few months ago, the IPO prices would be about SR80 per share,” he pointed out.
Speaking on behalf of NCB, Abdul Kareem Abu Alnasr said “Sipchem has two loans, the biggest worth $150 million. The company has already agreed with some three local banks to refinance the existing commercial bank facility on the basis of an Islamic Ijara lease structure, while the other smaller loan worth $36 million is in the process of being made Shariah-compatible. He said that all the company’s deposits had been invested in the Islamic Murabaha portfolio.
At a ceremony to honor the Sipchem’s decision on IPO last year, Al-Ohali stated that he was pleased with the decision and that this was another milestone for the rapidly evolving Sipchem.
In the last few years, Sipchem has successfully completed two large petrochemical plants owned and operated by its subsidiaries — International Methanol Company (IMC) and Gulf Advanced Chemical Industries Company (GACIC).
IMC began production in December 2004 generating one million metric tons of methanol per annum, a chemical used in a multitude of applications such as, wood products, resins, gasoline additives, in addition to films, fibers and polyester materials.
GACIC is the first company to produce butanediol in the GCC boasting an annual capacity of 75,000 metric tons.
During the first quarter of this year, Sipchem achieved a net profit of SR219.6 million compared to SR174.6 million for the same period of 2005. This was in part to the construction of Sipchem’s new Acetyls Complex during the second half of this year. The new facility will be located on the company’s site in Jubail Industrial City.
Eyad Shaqsah of Financial Transaction House in Jeddah told Arab News “In my opinion Sipchem is a very good investment that will increase in double or triple digits within the first days of trading on the Tadawul. Sipchem shares are being offered at a premium base with the companying possessing a well-established margin that was put in place seven years ago. At this time petrochemical companies are a lucrative investment especially with the Kingdom’s recent accession to the WTO.”
