Saudi Arabia’s oil giant Aramco completes $70 billion SABIC megadeal

Saudi Aramco has completed a deal it reached last year to buy a 70 percent stake in Saudi Basic Industries Corp. for around $70 billion.

Aramco will pay Saudi Arabia’s sovereign wealth fund in several installments between August this year and April 2028, the company said in a statement to the stock exchange in Riyadh. The first payment of $7 billion will be made on August 2, Aramco said. The sovereign fund, known as the Public Investment Fund, will provide Aramco with a loan for the acquisition.

Aramco, the world’s biggest oil exporter, agreed in March last year to pay 123.4 riyals a share for the PIF’s stake in SABIC, the equivalent of $69.1 billion. The rest of the chemicals maker will remain listed on the Saudi stock exchange, where Aramco stock also trades.

The oil giant signed a deal last year with Saudi Arabia’s sovereign wealth fund, the Public Investment Fund (PIF), to take the majority shareholding in the petrochemicals company.

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.

With Bloomberg

Read more:

Saudi Arabia’s oil giant Aramco buys 70 pct of SABIC for $69.1 billion in mega-deal

Coronavirus: SABIC expects more significant impact in second quarter earnings

Saudi Aramco receives unconditional clearance from EU on SABIC purchase