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Arabian Entertainment Company Ltd. (“AEC”), a leading food, beverage and entertainment company in Saudi Arabia, and Sagaliam Acquisition Corp. (NASDAQ: SAGA) (“Sagaliam”), a special purpose entity (“SPAC”), announced today that they have signed a definitive agreement to conduct a business combination.
Under the terms of the agreement, Supraeon Investments, Ltd. (“Supraeon”), the parent company of AEC and Sagaliam, to merge into a new company that is expected to be listed on NASDAQ, and Tarfeeh Holdings, Ltd. as a company adopt company brand.
Upon closing of the transaction, AEC will provide significant additional capital to continue its growth, better serve customers and execute on its strategic plan to become a leading food, beverage and live entertainment provider in the MENA region.
In addition, Sagaliam and AEC expect to raise an additional US$35 million through a private investment in public equity (“PIPE”). The anticipated $35 million from the PIPE is expected to be used primarily by AEC to pay for transaction-related expenses and fund the expansion of its business platform in Saudi Arabia and the MENA region.
Headquartered in Jeddah, Saudi Arabia, AEC is a leading owner and operator of fast casual restaurant franchises operating under the Applebee’s and Ocean Basket brands.
AEC has been active since 2001. AEC, along with its parent company Supraeon, is a portfolio company of GLD Partners, LP., a Los Angeles-based private equity firm (“GLD”).
Sagaliam is a SPAC that raised $116.5 million in its IPO on December 23, 2021.
The business combination agreement between AEC and Sagaliam provides that the sponsor agrees not to sell its founders’ interests for a period of twelve months after the business combination, subject to the terms of the lock-up agreement. Sponsor believes that this “lock-up” period aligns the interests of Sponsor with those of Sagaliam’s investors. Therefore, subject to certain limited exceptions, Sponsor expects to remain invested in the combined company after the business combination is completed.
“AEC is raising the bar in the fast-casual food and beverage industry in the MENA region and is committed to creating the best possible experience for customers, partners and employees so it can create more moments that matter,” said Omar Mirza, Interim CEO of AEC. “We are excited to enter the public markets through our business combination with Sagaliam. We believe this capital, combined with the significant experience of our leadership team in the food, beverage and entertainment industries, will enable AEC to grow our workforce, expand our offering and continue to invest in our customer experience while maintaining our core values and the family-first culture.”
“We believe that AEC has evolved into one of the fastest growing providers of fast casual dining experiences in Saudi Arabia thanks to its world-class leadership team and the consistently high quality service it provides to its customers,” said Barry Kostiner, CEO and Director of Sagaliam. “We have confidence in the AEC team and believe they are ready to continue to build on their market position through this opportunity to become a public company.”
“GLD is pleased to support the merger of AEC and Sagaliam. GLD originally acquired AEC based on its belief in the growth potential of AEC and the overall MENA region. GLD remains committed to finding investment opportunities in the MENA region and this transaction has been completed in line with GLD’s investment strategy,” said Eric Miller, spokesman for GLD Partners, LP. “AEC and Sagaliam are ideal partners. AEC’s differentiated model and track record combined with Sagaliam’s investment will enable AEC to expand its leadership position and deliver shareholder value.”
Under the terms of the definitive business combination agreement, the transaction is expected to raise AEC up to $151.5 million in proceeds, including $35 million from an anticipated PIPE offering, described above, and 116, $5 million in SPAC cash, subject to no redemptions, based on a pre-transaction value of $379 million. No additional financing beyond the $35 million PIPE offering is contemplated for the business combination, which includes an aggregate net cash requirement of $25 million at closing.
Upon completion of the Proposed Transaction, AEC’s senior management will continue in their current roles. Current AEC owners will retain approximately 50% ownership at closing subject to no redemptions from SPAC shareholders.
The respective boards of directors of Sagaliam and AEC have approved the proposed transaction. Completion of the Proposed Transaction is subject to Sagaliam shareholder approval and other customary closing conditions. The parties expect the proposed transaction to close in the first half of 2023.
A more detailed description of the terms of the transaction and a copy of the definitive agreement to the business combination will be included in a current report on Form 8-K to be filed by Sagaliam with the United States Securities and Exchange Commission (the “SEC”). Sagaliam or one of its subsidiaries or affiliates will file a registration statement (which will include a proxy statement and a prospectus) with the SEC in connection with the transaction.
Investor Conference Call
AEC and Sagaliam will host a joint investor conference call to discuss the deal and the proposed transaction. Information on how to join the conference call will be provided under both https://sagaliam.com or www.tarfeehksa.com.
For investor relations, including a copy of an investor presentation filed with the SEC, please visit Sagaliam’s website at www.sagaliam.com or the SEC’s website for Sagaliam’s filings at: https://sec.report/CIK/0001855351.
King & Spalding LLP is acting as legal counsel to AEC and Mayer Brown LLP and Al Akeel & Partners are legal counsel to Sagaliam. Marshall & Stevens, Inc. has provided a fairness opinion to a special committee of Sagaliam’s board of directors in connection with the proposed transaction.