Oil behemoth Saudi Aramco has bought a 70 per cent stake in petrochemicals giant Sabic from Saudi Arabia’s state investment fund for a whopping $69bn (£55bn).
The deal, which will create a petrochemicals entity with combined production volumes of 90m tonnes, valued Sabid at 123.39 riyals per share, a 27.5 per cent premium on its current share price.
In addition, Aramco has amended the terms of the deal with the Public Investment Fund (PIF), with the final payment instalment now due in 2028, not 2025.
The transaction was funded through promissory notes issued to the PIF at the deal’s close on Tuesday, Aramco said.
Prior to the deal, Sabic was the world’s fourth-largest refining company, with over 33,000 employees around the world.
The deal, which was first agreed last year, is one of the biggest ever in the history of the industry, and fits in with state-owned Aramco’s plans to expand its downstream activities.
Aramco chief Amin Nasser said that the deal would transform Aramco into one of the world’s largest petrochemicals firms.
“It is a significant leap forward which accelerates Aramco’s downstream strategy and transforms our company into one of the major global petrochemicals players”, he said.
The recent collapse in oil prices due to the coronavirus crisis has hurt the Saudi economy, with authorities tripling the country’s VAT rate to counter its dependency on the struggling commodity.
There had been fears that the slump would mean that Aramco would be unable to pay out $75bn in dividends to the state this year, although its first quarter payments were in line with full-year plans.
The deal will enable PIF to spend billions of dollars on the Gulf state’s plans to diversify away from oil, as set out in crown prince Mohammed bin Salman’s Vision 2030 strategy.
PIF governor Yasir Othamn al-Rumayyan, said the deal would provide “capital for PIF’s long-term investment strategy as it drives the economic transformation and growth of Saudi Arabia, further benefiting the people of our country”.