Bahri Annual Report-2012

Merger of Vela’s Fleet and Operation with Bahri

On June 27, 2012, Bahri and Saudi Aramco signed a non- binding memorandum of understanding to merge the fleet and operations of Vela (100% owned by Saudi Aramco) with Bahri, within the framework of a deal that would enhance Bahri’s activities and position. The Boards of Directors of Bahri, Saudi Aramco and Vela approved the merger on October 17, 2012 and the final binding agreements were signed on November 4, 2012, which required a number of regulatory approvals to enter into force. Pursuant to the agreements, Bahri will own Vela’s entire fleet, which includes 14 VLCCs, one floating storage VLCC and five product tankers. Moreover, all of Vela’s vessels and employees will be merged with Bahri in accordance with the Company’s new structure following the merger. Pursuant to the terms of the long-term shipping contract (minimum duration of 10 years), Bahri will become the exclusive provider of VLCC crude oil shipping services to Saudi Aramco for crude oil sold by Saudi Aramco on a delivered basis. Under this contract, Bahri will meet all Saudi Aramco’s future needs. To do so, the Company shall optimally operate its fleet, which will include 31 VLCCs after the merger, in addition to chartered VLCCs if needed. Saudi Aramco will continue to manage all crude oil marketing and sales directly with its customers, and Bahri will provide reliable transportation services to Saudi Aramco on competitive terms. Both companies plan to explore ways to expand their cooperation in the maritime sector. Pursuant to the agreements, Bahri will be protected in the event freight rates drop below the agreed minimum threshold. In the event freight rates increase beyond the agreed threshold (compensation limit), Bahri will compensate Saudi Aramco for the amounts it has paid when the freight rates drop below the minimum rate. Bahri and Vela have agreed to make interim arrangements to operate the VLCCs that are currently owned by

Bahri in accordance with Saudi Aramco’s program to transport crude oil through VLCCs. These interim arrangements will be enforced as of January 1, 2013, until the long-term contracts are effectuated in accordance with the merger terms. Pursuant to the agreements of the merger, Bahri will pay Vela a total consideration of approximately SAR 4,875,000,000 (equivalent to US$ 1.3 billion) in the form of a cash payment of SAR 3,122,812,500 (equivalent to US$ 832.75 million) and the issue of 78,750,000 new shares in Bahri at an agreed price of SAR 22.25 per share. Following the merger, Bahri’s total issued shares will number 393,750,000. The new shares, which will be issued to a fully-owned subsidiary of Saudi Aramco, will constitute 20% of Bahri’s capital and will be fairly represented on Bahri’s Board of Directors. Bahri also intends to finance cash payments through Sharia-compliant debt financing. The merger represents a qualitative leap for Bahri, which will substantially enhance its financial and commercial position, expand its business, and consolidate its leading role in the field of maritime transport. The merger will also achieve the aspirations of Bahri and Saudi Aramco to meet KSA’s growing needs, develop and boost the local maritime sector, localize industries and establish local supportive industrial and service sectors. The merger will be subject to several conditions, such as the approval of a Bahri extraordinary general meeting, achieving an increase in capital, and obtaining the approval of the Saudi Arabian Capital Market Authority and the Supreme Council for Petroleum and Mineral Affairs.


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