In a surprising turn of events in one of the most prominent merger developments in the Saudi insurance sector, Enaya Cooperative Insurance Company announced that its shareholders rejected the offer submitted by Salama Cooperative Insurance Company during an extraordinary general assembly meeting held on Sunday. This decision puts an end to a deal that was expected to create a stronger and more competitive insurance entity in the local market.
According to the official statement published by Enaya on the Saudi Stock Exchange (Tadawul) website, the vote resulted in the rejection of the offer to merge Enaya with Salama. The proposed deal involved issuing 18,894,000 new shares in Salama to Enaya shareholders, which would have resulted in Enaya's dissolution as a separate legal entity. Based on this rejection, the board of directors' authorization to take the necessary actions to implement the deal was also rejected.
Background and context of the deal
This development comes within the context of a broader strategic direction for the insurance sector in Saudi Arabia, supported by the Saudi Central Bank (SAMA) and the Capital Market Authority. This direction aims to encourage mergers and acquisitions among insurance companies to strengthen the sector's financial solvency, create larger entities capable of managing greater risks, increase operational efficiency, and provide better customer services, in line with the objectives of the Financial Sector Development Program under the Kingdom's Vision 2030.
Recent years have witnessed several successful mergers, such as the merger of Walaa Insurance with MetLife AIG ANB, and the merger of Al-Ahlia Insurance with Gulf Union, which has charted a clear course towards concentrating the market in the hands of larger and more stable players.
The importance of the event and its expected impact
The rejection of the deal by Enaya shareholders is a pivotal event with significant repercussions on several levels. Locally , this decision raises questions about the future of both companies. Enaya will need to reassess its future strategy, whether by seeking another merger partner on more favorable terms or by focusing on organic growth in a highly competitive market. Salama Insurance, for its part, may continue to pursue other acquisition opportunities to strengthen its market position.
This rejection also demonstrates that shareholder approval remains the crucial hurdle in any merger, even with regulatory support and board approval. This event may affect investor sentiment in both companies' shares in the short term and make other companies more cautious in structuring future mergers to ensure their acceptance by all parties.
At the regional level , the failure of the deal provides an important case study for neighboring markets that are also seeking to reform their insurance sectors, underscoring the importance of aligning shareholders’ interests with the strategic objectives of mergers to ensure their success.
