DUBAI, Sept 28 (Reuters) - Saudi Industrial Investment Group (SIIG) (2250.SE) and the National Petrochemical Company (Petrochem) (2002.SE)have signed a non-binding agreement on a proposed merger, they said on Tuesday. The deal would involve a share exchange offer from SIIG to acquire the 50% of Petrochem it does not already own, the companies said in separate bourse statements. SIIG would pay Petrochem"s shareholders by issuing new shares in SIIG and Petrochem would be delisted. Petrochem"s shareholders would receive 1.27 shares in SIIG in exchange for each share they own in Petrochem. At a market price of 39.9 riyals per share of SIIG and 49.7 riyals for Petrochem, the exchange ratio implies a 2% premium for Petrochem shareholders, Arqaam Capital said in a note. The potential merger will simplify shareholding structure and sharpen focus on growth capital expenditure, it said. SIIG has appointed HSBC Saudi Arabia as its financial adviser while Petrochem is working with GIB Capital. The non-binding memorandum of understanding is subject to the companies reaching a final agreement on terms of the deal. The two firms began talks last year over the merger, which would mark further consolidation in the Saudi petrochemicals sector, after oil giant Saudi Aramco (2222.SE) bought a 70% stake in Saudi Basic Industries (2010.SE) last year. Petrochem has a market capitalisation of about $6.3 billion and SIIG of about $4.8 billion. The Saudi government has a 13.1% stake in SIIG and a 25% stake in Petrochem, Refinitiv data showed. Reporting by Davide Barbuscia; editing by Stephen Coates and Jason Neely Our Standards: The Thomson Reuters Trust Principles.