Saudi Re boosts capital by $71m in PIF subscription deal

Saudi Reinsurance Co. plans to increase its capital by SR267.3 million ($71 million) through a strategic subscription agreement with the Public Investment Fund, aimed at enhancing its financial position.

The binding subscription agreement, signed on July 4, will see the Kingdom’s first reinsurance company raise its capital from SR891 million to SR1.15 billion. This increase will be achieved through the issuance of 26.73 million new ordinary shares, each valued at SR10, according to 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, resulting in a total subscription amount of SR427.68 million.

This transaction will give PIF a 23.08 percent ownership stake in the company following the capital increase.

The agreement, initially outlined in a non-binding memorandum of understanding on Oct. 8, 2023, and extended on Dec. 25, 2023, for an additional six months, underscores the growing business environment within the Kingdom.

Saudi Re’s capital increase, supported by PIF’s subscription, enhances its financial strength and competitive position.

This capital increase aligns with Saudi Arabia’s Vision 2030 goals, promoting a robust investment climate, economic diversification, and bolstering the Kingdom’s insurance sector.

Finalization of the capital increase is subject to 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 serving as the financial advisor to Saudi Reinsurance Co., while GIB Capital is advising PIF on the transaction.

Earlier this year, the Kingdom’s sovereign wealth fund raised its stake in Middle East Paper Co. to 23.08 percent through a similar capital infusion.

In a press statement, PIF stated that the deal will empower MEPCO to expand its production, enhance operational efficiency, and contribute to environmental stability. This move aligns with PIF’s sustainability goals and reflects its commitment to fostering environmentally responsible practices in the acquired company.