Arkan Building Materials Company’s shareholders have overwhelmingly approved the merger with Emirates Steel (ESI).

The board had resolved to recommend to Arkan shareholders that they approve the offer received from majority shareholder Senaat on 9 May to acquire ESI (see Kallanish passim). Senaat, which is backed by Abu Dhabi state-owned ADQ, owns 51% of Arkan, which is listed on the Abu Dhabi Securities Exchange, as well as all of unlisted ESI.

The key terms of the strategic combination are to transfer ESI to Arkan in consideration for the issuance by Arkan to Senaat of a convertible instrument. Upon closing the transaction, the convertible instrument would automatically convert into AED 5.1 billion ($1.38 billion) ordinary shares in Arkan at a fixed price of AED 0.798 per share. Following the conversion, Senaat would own 87.5% of the entire issued share capital of Arkan.

Arkan chairman Jamal Salem Al Dhaheri says: “We are pleased to have received the support of our shareholders to move forward with the strategic combination of Arkan and Emirates Steel. The transaction will offer investors access to a national and regional champion in the building materials and construction sector, that is well placed for opportunities that emerge from the economic recovery that lies ahead.”

The transaction is expected to close later this year; until then, both companies will continue to operate independently.

ESI is a 3.5 million tonnes/year crude steel capacity steelmaker producing rebar, wire rod and heavy sections, whereas Arkan produces cement, concrete products, glass fibre reinforced polyester (GRP) and PVC pipe.