Under a non-binding memorandum of understanding, Bahri, or National Shipping Company of Saudi Arabia, will pay Vela 4.875 billion riyal comprising 3.123 billion in cash and the rest in stocks to merge their fleets and operations. (US$1=3.75 riyal).
The expanded Bahri will own 77 vessels including 32 Very Large Crude Carriers (VLCCs), 20 chemical tankers, five product tankers, four roll-on roll-offs (ROROs) vessels and another 16 vessels under-construction.
Aramco said Bahri would become the world’s fourth-largest VLCC owner, enhancing Saudi Arabia’s ability to meet the maritime transport needs of its expanding downstream businesses while continuing to reliably and efficiently serve existing customers.
When the merger is completed sometime next year, Bahri would be the exclusive provider of VLCC crude oil shipping services to Saudi Aramco under a long-term agreement and would take responsibility for maintaining reliable crude transportation at all times. The two companies will explore ways to expand their cooperation in the maritime sector.
Bahri has appointed JP Morgan Capital while Saudi Aramco has appointed HSBC Saudi Arabia as their respective financial advisors for the transaction.
Bahri chairman Abdullah Al-Rubaian and Saudi Aramco senior vice president Khalid G. Al-Buainain, who also serves as chairman of Vela, signed the agreement in Dhahran last month.
“By creating a new global leader in shipping, Saudi Aramco hopes to build a strong company that can leverage its capabilities in the shipping sector and would meet its growing business portfolio. This company in turn will serve as a national champion that will promote the development of a thriving national maritime industry that creates jobs and other long-term opportunities for the kingdom,” said Saudi Aramco President and CEO Khalid Al-Falih.
“This is a transformational step for Bahri to strengthen its strategic partnership with Saudi Aramco and offers expanded future growth opportunities to create long-term value for our shareholders,” said Bahri chairman Abdullah Al-Rubaian.