Saudi Aramco, PIF amend terms of payment for SABIC acquisition

John Benny, Al Arabiya English

Saudi Aramco said it has agreed to change the terms of payment related to its acquisition of a 70 percent stake in Saudi Arabia Basic Industries Corp (SABIC) by issuing four bonds to fund a portion of the deal.

Aramco said the seller loan will be secured by four separate bonds, issued by the oil company to Saudi Arabia’s sovereign fund, the Public Investment Fund (PIF).

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

Earlier this year, the oil giant signed a $69 billion deal with the PIF to take a majority shareholding in the Kingdom’s largest petrochemicals company.

The deal to acquire a stake in SABIC is expected to boost Saudi Aramco’s chemicals and refining businesses and make it more attractive to investors ahead of a highly-anticipated intial public offering (IPO), which was formally announced on Sunday.
 

FAQ's

Saudi Aramco is the Kingdom’s state-owned energy company and the world’s biggest oil producer. In November, the company reported a profit of $68 billion for the first nine months of 2019 – making it the most profitable company in the world.
An initial public offering (IPO) is the process by which a company sells a portion of its ownership (shares) to public investors to raise funds (also known as capital). The company sells its shares by listing them on a public stock exchange, where investors can purchase them.
"I am honored to announce that Saudi Aramco will become a listed company on the Saudi Stock Exchange,” Chairman Yassir al-Rumayyan said in early November. The exact percentage of the company and the possibility of another listing on a foreign exchange are both still unknown details, however.
Senior Saudi Arabian authorities have targeted a $2 trillion valuation. At this valuation, a 5 percent listing would raise $100 billion in funds – dwarfing any other IPO in history. However, some analysts and investment banks have predicted a range closer to between $1.2 and $1.5 trillion.
The IPO prospectus is expected to be released on November 10, with pricing expected November 17. Meanwhile, the float is expected to take place on December 4, followed by trading on December 11.
The IPO is part of Saudi Arabia’s overall strategy to transition into a post-hydrocarbon age. The income generated would be funneled into the Public Investment Fund (PIF), the Kingdom’s sovereign wealth fund (SWF). Saudi Arabia’s Vision 2030 plans to transform the PIF into a giant investment vehicle to help the country diversify its economy and reduce its reliance on oil revenues.
Saudi Vision 2030 is the Kingdom’s ambitious plan to diversify its economy by reducing dependence on oil and developing non-oil sectors ranging from healthcare to mining. The IPO is seen as a cornerstone of Vision 2030, boosting the PIF as the long-term investment vehicle for the Kingdom.

Saudi Arabia’s Crown Prince Mohammed bin Salman

- The Crown Prince is the architect of Vision 2030 and originally announced plans to list shares of Saudi Aramco in 2016.

Prince Abdulaziz bin Salman, Saudi Arabia’s Energy Minister

- Prince Abdulaziz assumed the role of energy minister in September of this year, replacing Khalid al-Falih.

Yasir al-Rumayyan, Chairman, Aramco

- Al-Rumayyan became chairman of Aramco’s board in September. He is best known as governor of the PIF, a role he continues to hold.

Amin Nasser, President and CEO, Aramco

- Nasser has been with Aramco for more than three decades and has held numerous leadership positions.