DUBAI: Saudi Aramco has sealed the $69.1 billion acquisition of a 70 percent stake in SABIC, creating a new force in the global petrochemicals industry.
The acquisition is one of the biggest ever in the global petrochemicals industry, and will enable Aramco to grow its high-value downstream operations and refining capability.
The terms of the sale to the Public Investment Fund (PIF), the Kingdom’s sovereign wealth investor, were agreed last year but it was formally completed Wednesday with an announcement to the Tadawul stock exchange.
Yasir Al-Rumayyan, PIF governor, said: “This is a significant milestone for three of Saudi Arabia’s most important entities.”
Despite falling valuations because of the pandemic downturn and oil price volatility, Aramco stuck to the original cash valuation for SABIC shares agreed last year.
Aramco president and CEO Amin Nasser said: “Despite the COVID-19 pandemic forcing many companies to rethink or revise their long term strategies, our long-term focus, financial strength and resilience have enabled us to complete this historic deal. The strategic integration of our upstream production and downstream chemicals feedstock production with SABIC’s chemicals platform is expected to create opportunities for selective integration synergies that support growth and add value for shareholders.”
SABIC, which is the fourth largest petrochemicals company in the world, tweeted: “We are proud to join the Saudi Aramco family of companies and we look forward to achieving together and delivering chemistry that matters.”
The PIF gets the benefit of a cash stream to fund its ambitious strategy of investing in transformational projects within the Kingdom and taking advantage of bargain assets internationally.
Al-Rumayyan added that the deal provided capital for PIF’s long-term investment strategy as it drove the economic transformation and growth of Saudi Arabia, further benefiting citizens.
SABIC chairman and CEO Yousef Al-Benyan, said that the global scale and presence of SABIC brought “significant enhancements” to Aramco.
“As the chemicals growth platform, SABIC expects to benefit from the additional scale, technology, investment potential, and growth opportunities Aramco will bring in integrated energy and chemicals production,” he added. “We look forward to contributing to global chemicals’ growth, while continuing to support Saudi Vision 2030.”
The deal was struck at the price of SR123.39 ($32.90) per share agreed last year, compared to a market value of SR89 on Tadawul on Wednesday. The 30 percent of SABIC shares not sold to Aramco will continue to be traded in Riyadh.
Aramco will pay for the shares via the issue of promissory notes in nine installments running up to 2028, with an immediate payment of $7 billion to be paid in August. It has also agreed to make an advance payment of $3 billion in April 2022 dependent on certain unspecified conditions in the oil market, as well as $2 billion repayments for a loan from PIF.
Analysts said that the staged payment terms were designed to ease Aramco cash flow worries in a volatile oil market and in light of significant dividend commitments it made at the time of its record breaking initial public offering last year.
As the majority shareholder, Aramco has the right to appoint most of the directors of the new board of SABIC.
A special six-person collaboration and integration committee will be set up under the chairmanship of Al-Benyan, with three members from Aramco.
Three members of the SABIC board have resigned from their positions and been replaced by Aramco executives, including its senior vice president for finance Khalid Hashim Al-Dabbagh.