Saudi Aramco’s $69.1 billion deal to purchase a majority shareholding of Saudi Basic Industries Corp (SABIC) is a key pillar in the oil giant’s growth strategy, a senior vice president at the company told Al Arabiya English Monday.
On Wednesday last week, Aramco completed a deal to buy 2.1 billion shares, or 70 percent, of SABIC for 259 billion riyals ($69.1 billion). 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).
“The share acquisition is expected to be a major step forward in accelerating our downstream strategy, a key pillar in our growth ambition, by accessing the petrochemicals market, the fastest-growing sector of oil demand,” said Abdulaziz al-Gudaimi, Senior Vice President of Downstream, Saudi 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.
“We are excited with the completion of the transaction, which accelerates Saudi Aramco’s Downstream strategy and transforms our company into one of the major global petrochemicals players,” al-Gudaimi added.
The integration of SABIC’s existing downstream abilities, an industry term referring to refining of crude oil and processing it into usable products, and Aramco, the world’s biggest producer of oil, will create significant opportunities for the combined firm, al-Gudaimi explained.
“SABIC brings us a number of key attributes including world-class expertise, access to growth product areas and markets as well as scale in key product areas. The acquisition now makes Aramco a major petrochemical producer globally by production capacity.”
“The deal is expected to unlock significant value in the hydrocarbons value chain by allowing more seamless integration of Saudi Aramco’s capabilities with SABIC’s downstream expertise,” he said.
The purchase fits in with Aramco’s overall strategy because the firm sees the petrochemical industry as crucial, with demand in the sector expected to skyrocket.
“We expect long-term demand for petrochemicals to grow, with the sector expected to record the fastest growth in oil demand to 2040,” al-Gudaimi explained.
Keeping the brand
On Wednesday, SABIC CEO Yousef al-Benyan told Al Arabiya that following the acquisition the firm would maintain its identity and governance.
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.
Both firms, individually giants in their respective industries, working together will also be a significant benefit for Saudi Arabia, al-Gudaimi said.
“This acquisition is an important moment for the Kingdom’s economy … Overall, this acquisition means Saudi Aramco – and by extension Saudi Arabia - will cement its critical position in the current and future global energy and chemicals markets,” he concluded.