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Oil giant Saudi Aramco completes Us$70bil takeover of Sabic

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RIYAHD: Saudi Aramco has completed a deal it reached last year to buy a 70% stake in Saudi Basic Industries Corp for around Us$70bil, roughly equal to the chemical maker’s entire value now.

Aramco will pay Saudi Arabia’s sovereign wealth fund in several installmen­ts between August this year and April 2028, the company said in a statement to the stock exchange in Riyadh. The first payment of Us$7bil will be made on Aug 2, Aramco said. The sovereign fund, known as the Public Investment Fund, will provide Aramco with a loan for the acquisitio­n.

The deal effectivel­y transfers cash from one arm of the Saudi state to another. It enables Aramco to accelerate its push to turn oil into products such as plastics, while giving the PIF more cash to pay for its burgeoning list of spending commitment­s both inside the country and abroad.

Aramco, the world’s biggest oil exporter, agreed in March last year to pay 123.4 riyals a share for the PIF’S stake in Sabic, the equivalent of Us$69.1bil.

The rest of the chemicals maker will remain listed on the Saudi stock exchange, where a small sliver of Aramco stock also trades. That will prevent Aramco from being able to fully integrate Sabic.

Since the the deal was announced, Sabic’s stock has dropped to less than 90 riyals.

The transactio­n serves as a way for the PIF to get a significan­t cash injection, since the proceeds it was counting on receiving from Aramco’s initial public offering fell short of expectatio­ns.

Crown Prince Mohammed Bin Salman had expected the share sale to value Aramco at US$2 trillion and perhaps raise as much as Us$100bil from global investors. After internatio­nal investors balked at the Prince’s numbers, Aramco settled on a smaller domestic offering, which raised about Us$30bil, still making it the largest IPO ever.

The sovereign wealth fund, under the leadership of Yasir Al-rumayyan, who’s also Aramco’s chairman, is shifting its investment focus.

Five years ago it was a holding company for government stakes in the likes of Sabic and National Commercial Bank. After an aggressive period of dealmaking, the fund now holds stakes in Citigroup, Facebook, Uber and is one of the major investors in Softbank’s Vision Fund.

The PIF lies at the heart of Saudi Arabia’s economic transforma­tion plan known as Vision 2030, which aims to reduce its reliance on oil.

The fund is meant to be an anchor investor in domestic projects like the Us$500bil futuristic city of Neom, which Prince Mohammed wants to develop on the kingdom’s northweste­rn coast.

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