Saudi Aramco will buy a majority stake in Saudi Basic Industries Corp. from the kingdom’s sovereign wealth fund as the world’s biggest oil firm turns its attention to petrochemicals.
The deal, first mooted last year, values the Public Investment Fund’s 70 per cent stake at US$69.1 billion, or 123.4 riyals per share, according to a statement. The remaining shares, traded on the Saudi stock market, aren’t part of the transaction, set to be the biggest ever deal in the Middle East.
The Sabic deal was proposed last year after the oil giant’s plans for an initial public offering were postponed. International investors balked at Crown Prince Mohammed bin Salman’s US$2 trillion valuation. By channeling money from Aramco to the PIF, two arms of the Saudi state, the deal offered another route to the cash originally sought from the offering.
Aramco plans to invest US$500 billion over the next decade, and much of that will be on refineries and chemical plants. The company wants to secure future demand for its barrels, and acquiring control of the Middle East’s biggest chemical maker would bring it closer to its goal of becoming one of largest producers of raw materials used to make plastics.
The companies are at a “fairly advanced” stage of planning for the proposed acquisition as well as the Aramco bond issuance that will finance the deal, Energy Minister Khalid Al-Falih said earlier this month. Aramco’s board was briefed on the acquisition this month.
Saudi Aramco may stagger payments for the Sabic acquisition, offering flexibility in how to finance the largest deal in the kingdom’s history, Al-Falih said in January. The company has very little debt and plans to issue bonds to fund at least part of the purchase. Saudi Aramco picked banks including JPMorgan Chase & Co., Morgan Stanley, Citigroup Inc., HSBC Holdings Plc, National Commercial Bank to manage the bond sale, people familiar with the matter have said.
–With assistance from Nayla Razzouk and Anthony DiPaola.
Bloomberg.com
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