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Aramco buys 70% of SABIC for $69.1 billion

Dubai: Oil giant signed a deal last year with Saudi Arabia’s sovereign wealth fund, the PIF. Saudi Aramco purchased 2.1 billion shares, or 70 per cent, of Saudi Basic Industries Corp (SABIC) for 259 billion riyals ($69.1 billion) in four special transactions on Sunday.

Saudi Aramco began executing the acquisition through block trades on Sunday. A total of 2.1 billion Sabic shares changed hands on the Saudi exchange in four transactions as the oil company moves ahead with the purchase from the kingdom’s Public Investment Fund. Aramco will pay 93.3 billion riyals (about $24.8 billion) this week as a first installment in the dea1.

As previously announced, the price per share was 123.4 riyals ($32.8).

“The deal completion is on-track with expectations to be finalized before the end of the second quarter. All necessary pre-closing regulatory clearances have been obtained. We will make a completion announcement in due course,” Saudi Aramco told Al Arabiya English in a statement.

The oil giant signed a deal last year with Saudi Arabia’s sovereign wealth fund, the Public Investment Fund (PIF), to take the majority shareholding in the petrochemicals company.

The payment for SABIC, the world’s fourth-largest petrochemicals firm, will be funded in part by four bonds issued by Aramco to the PIF, reports indicated late last year.

The purchase of Sabic is a key part of Aramco’s strategy of expanding from oil production into chemicals, and it also serves as a way to help PIF raise cash to fund its investment plans.
PIF gets fund injection

The deal could see injection of billions of dollars into the PIF, giving it the firepower to proceed with its plans to create jobs and diversify the largest Arab economy beyond oil exports, including a mega business zone in the northwest of the country.

Aramco has been increasing its investments in refining and petrochemicals to secure new markets for its crude, as it sees growth in chemicals as central to its downstream expansion strategy.

Aramco indicated that 36 per cent of the purchase price – which could be adjusted for certain expenses – will be paid in cash, while 64 per cent will be paid in the form of a seller loan. Therefore, the proceeds to the PIF in the form of cash will amount to $500 million, and the five additional bonds will be worth $2.5 billion.

The initial agreement involved Aramco paying 123.4 riyals ($32.85) a share for Sabic, a value 39 per cent higher than the price of the stock on Sunday. Sabic lost 0.1 per cent to trade at 88.90 riyals as of 2:16 p.m. in Riyadh, while Aramco declined 0.3 per cent to 32.25 riyals.

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