Arkan’s board of directors has approved the building materials company’s proposed merger with Emirates Steel (ESI).

Arkan majority shareholder and ESI owner General Holding Corp (Senaat) submitted the merger offer last month (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, and the entire shareholding of unlisted Emirates Steel.

The key terms of Senaat’s offer are to transfer Emirates Steel to Arkan in consideration for the issuance by Arkan to Senaat of a convertible instrument. Upon closing of the transaction, the convertible instrument would automatically convert into 5.1 billion ordinary shares in Arkan at a fixed price of AED 0.798 ($0.22) per share. Following the conversion, Senaat would own 87.5% of the entire issued share capital of Arkan.

Arkan chairman Jamal Salem Al Dhaheri said: “Arkan is poised to capitalise on emerging opportunities in the construction and building materials sectors, as the world begins to recover from the Covid-19 pandemic. We expect this deal to be accretive for Arkan’s shareholders. It will strengthen Arkan’s balance sheet and financial performance, deliver greater international scale, and position Arkan to become an entry point for investing in a key regional sector while playing a key role in the UAE’s Industrial Strategy ‘Operation 300 Billion.’”

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

The transaction will now be put forward for approval to Arkan’s general assembly and is subject to regulatory and shareholder approvals.