Al Sagr Ins. files for SAR 160 mn rights issue to teak capital base, fuel growth

Al Sagr Cooperative Ins. wants to raise SAR 160 mn to shore up capital base and fuel growth. Khobar-based Al Sagr Cooperative Ins. is gearing up for a 114.3% capital hike by way of issuing and offering new rights to its current shareholders, it said in a prospectus (pdf) . The move — on which shareholders have not yet voted — would bring the company’s total capital up to SAR 300 mn.

What’s on offer: The company is planning to issue 16 mn ordinary shares at SAR 10 each, to be made available to its shareholders for subscription at a ratio of 1.1429 rights for every individual share they currently hold.

SOUND SMART- Rights issues are tradable securities, which means that despite them being initially exclusive to shareholders, they can be immediately sold on the open market. This allows new investors to buy these rights, granting them the option to subscribe and purchase shares of Al Sagr.

Use of proceeds: Out of the total SAR 160 mn in expected proceeds, the company will direct some SAR 79 mn towards increasing bank deposits and SAR 50 mn towards investing in debt instruments, while SAR 15 mn will go into replacing the technical system for insurance and financial operations, and about SAR 9 mn into boosting its regulatory deposits. The remaining SAR 7 mn will be used to cover transaction-related expenses.

What’s next: Shareholders of Al Sagr Cooperative are scheduled to vote on the rights issue on Wednesday, 26 June, after which the timeline of the offering would be announced.

A quick look at Al Sagr’s FY 2023: The company turned to the black with a net income of SAR42.3 mn in 2023, and revenues were up 2.7% y-o-y to SAR 486 mn driven by an increase in its medical and general incident segment, it said in an earlier disclosure to Tadawul.

Background: The transaction comes after the company’s board of directors recommended that shareholders agree to meet Tadawul’s minimum requirements for listed ins. firms and support its expansion plans, according to a filing to the exchange. Al Sagr Cooperative had lined up Capital Market Authority approval for the transaction in April.

ADVISORS- AlBilad Capital is quarterbacking the transaction as lead manager, financial advisor and underwriter. KLA & Co. was tapped as legal advisor. PwC, AlBassam & Partners, Al Kharashi & Co will act as auditors, while Badri Management Consultancy, United for Actuarial Services and SHMA Consulting will act as actuarial consultants.