The Saudi International Petrochemical Company (Sipchem) and Sahara Petrochemical Company (Sahara) have jointly signed a memorandum of understanding (MOU) over a proposed merger deal. The two companies have agreed to start the due diligence process for the transaction. 

According to Arab News, Sahara will become a subsidiary of Sipchem should the deal be completed. 300.57 million new shares will also be issued to existing Sahara shareholders. This would bring the total number of shares issued to 667.2 million and raising the capital to SAR6.67 billion. 

The proposed merger is expected to enhance Sipchem's leading position in the local and international petrochemical industry and boost its operational efficiencies. The merged company would become a stronger platform for further growth in the long-term, the report said.

The deal was signed by Sipchem chief executive officer Ahmed Al-Ohali and Sahara chief executive Isam Hamdi. The two companies hope to sign the merger agreement in the first half of 2014, Arab News said.