In what is said to be one of the largest deals in the chemical industry, the world’s largest oil/petrochemical firm Saudi Aramco is to acquire a 70% stake in Saudi Basic Industries Corp (Sabic) for US$69.1 billion, from its owner, the Public Investment Fund (PIF) of Saudi Arabia.
The remaining 30% publicly traded shares in Sabic are not part of the transaction, and Aramco says it has no plans to acquire these remaining shares. The transaction is subject to certain closing conditions, including regulatory approvals.
Headquartered in Riyadh, Sabic has global operations in over 50 countries with 34,000 employees. In 2018, Sabic’s consolidated production volume across its various business units was 75 million tonnes, and recorded net income of US$$5.7 billion, annual sales of US$45 billion, and total assets of US$$85 billion.
The agreement, which comes after months of talks between Aramco and PIF, is said to have contributed to the delay of Aramco’s planned multi-billion dollar initial public offering (IPO).
Aramco says it will help boost its downstream growth plans by increasing global participated refining capacity from 4.9 million to 8-10 million barrels/day by 2030, of which 2-3 million barrels/day will be converted into petrochemical products. This downstream portfolio will consume significant quantities of Arabian crude oil. Aramco and Sabic have petrochemicals production capacity of 17 and 62 million tonnes/year, respectively.
“This is a win-win-win transaction and a transformational deal for three of Saudi Arabia’s most important economic entities,” said Yasir al-Rumayyan, Managing Director of PIF.
A Reuters report says that Aramco is expected to issue its first international bond soon, to likely to partly back the Sabic acquisition.
Meanwhile, Aramco’s IPO initially planned for 2018, which was slated to be the largest IPO in history, was postponed to 2021 due to the acquisition of Sabic. One of the aims of the IPO was to raise money for the PIF, making the fund an engine for transforming the Saudi economy.
Commenting further on the sale of Sabic, Al-Rumayyan said, “It will unlock significant capital for PIF’s continued long-term investment strategy, underpinning sectoral and revenue diversification for Saudi Arabia.”
Amin Nasser, President/CEO, Saudi Aramco said: “This transaction is a major step in accelerating Saudi Aramco’s transformative downstream growth strategy of integrated refining and petrochemicals.”
Meanwhile, Abdulaziz Al-Judaimi, Senior Vice President of Downstream, Saudi Aramco, added that Aramco’s downstream strategy is focused on meeting global customer needs by securing outlets for our crude oil through the expansion and growth of its refining system and its integration with petrochemicals production.
“We are pursuing partnerships and acquisitions where we create long-term value, and developing groundbreaking crude-oil-to-chemicals technologies. Sabic is a good strategic fit and a solid platform to support our continued investment for future growth in petrochemicals – the fastest growing sector of oil demand,” he added.