SABIC to keep identity and governance after $70 bln Aramco acquisition: CEO

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Saudi Basic Industries Corp (SABIC) will maintain its identity and governance following the $70 billion acquisition of the petrochemical firm by oil giant Saudi Aramco, SABIC CEO Yousef al-Benyan told Al Arabiya on Wednesday.

Saudi Aramco completed a deal to buy 2.1 billion shares, or 70 percent, of SABIC for 259 billion riyals ($69.1 billion) on Wednesday. The deal had been in the works since last year when the oil giant agreed to take the majority shareholding in the petrochemicals company from the Kingdom’s sovereign wealth fund, the Public Investment Fund (PIF).

“SABIC will keep its identity, and its governance and work will remain as it is today,” al-Benyan said.

Al-Benyan called the acquisition a “new phase” for SABIC, noting the benefits for the company can reap from working with “the experience and size of Aramco.”

He said that the deal would support Saudi Arabia’s petrochemical industry and contribute to the Kingdom’s economy and role as a leading petrochemical producer.

“Aramco has clear strategic goals as a global energy company, and it’s going to make use of SABIC’s capabilities, be they operational, technical, human resources, or even international presence through our marketing and global supply chains. This deal will help SABIC accelerate achieving its strategic goals through investment growth and increase in interest,” al-Benyan explained.

When asked as to whether SABIC expects to receive any preferential treatment on feedstock prices, given that Aramco provides the raw materials to all of the Kingdom’s petrochemical firms, al-Benyan said, “There won’t be any preferential treatment,” noting that prices are set by the Ministry of Energy, not Aramco.

The payment for SABIC, the world’s fourth-largest petrochemicals firm, will be funded in part by four bonds issued by Aramco to the PIF, reports indicated late last year.

Aramco indicated 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 PIF in the form of cash will amount to $500 million, and the five additional bonds will be worth $2.5 billion.

In March, Aramco received unconditional clearance from the European Commission for the acquisition, the last clearance required for the transaction.

The company reported a 25 percent fall in first-quarter net profit in May, below analyst estimates, as the coronavirus pandemic slashes global demand for petroleum products.

Net profit fell to 62.48 billion riyals ($16.64 billion), down from 83.28 billion riyals the year before.

The company said at the time that the net profit fall was a reflection of “lower crude oil prices, as well as declining refining and chemicals margins and inventory re-measurement losses.”

SABIC also warned the same month that it expected a more significant impact on its business as a result of the coronavirus pandemic in the second quarter of the year.

The company reported a net loss of 950 million riyals ($252.89 million) for the first quarter, citing lower demand for petrochemical products in the wake of the coronavirus pandemic and impairment losses as the reasons for the fall.

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