Saudi Reinsurance Co. Boosts Capital with Strategic Subscription Agreement
In a bold move to enhance its financial position, Saudi Reinsurance Co. is set to increase its capital by a whopping SR267.3 million ($71 million) through a strategic subscription agreement with the Public Investment Fund.
Deal Details
The binding subscription agreement, inked on July 4, will result in the Kingdom’s leading reinsurance company raising its capital from SR891 million to SR1.15 billion. This capital boost will be achieved through the issuance of 26.73 million new ordinary shares, each valued at SR10, as per a recent bourse filing.
The new shares, representing 30 percent of the company’s current capital, will be fully subscribed by PIF at a subscription price of SR16 per share, totaling SR427.68 million. This move will grant PIF a 23.08 percent ownership stake in the company post the capital increase.
Strategic Impact
The agreement, initially outlined in a non-binding memorandum of understanding in October 2023 and extended in December 2023, highlights the thriving business landscape in the Kingdom. This capital infusion, supported by PIF, not only strengthens Saudi Re’s financial position but also enhances its competitive edge.
This capital increase is in line with Saudi Arabia’s Vision 2030, promoting a vibrant investment climate, economic diversification, and bolstering the Kingdom’s insurance sector.
Regulatory Approvals and Future Plans
The finalization of the capital increase is contingent upon approvals from regulatory bodies including the Insurance Authority, Capital Market Authority, Saudi Stock Exchange, and the company’s Extraordinary General Assembly. Upon completion, Saudi Re will appoint three PIF-nominated members to its board of directors.
Al Rajhi Financial Co. is acting as the financial advisor to Saudi Reinsurance Co., while GIB Capital is advising PIF on the transaction.
PIF’s Previous Investment
Earlier this year, the Kingdom’s sovereign wealth fund increased its stake in Middle East Paper Co. to 23.08 percent through a similar capital infusion. In a press statement, PIF highlighted that the deal will empower MEPCO to expand its production, enhance operational efficiency, and contribute to environmental stability, aligning with PIF’s sustainability goals and commitment to environmentally responsible practices.