Saudi Aramco completes acquisition of 70% stake in SABIC

Saudi Aramco bought a 70% stake in Saudi Basic Industries Corp (SABIC) on June 16 from the Public Investment Fund (PIF), for a total price of SAR 259.125 billion ($ 69.1 billion), or SAR 123.39 price per share.

All necessary pre-closing regulatory clearances have been obtained, Saudi Aramco said in a bourse statement on Wednesday.

On June 16, the giant oil producer and the Kingdom’s sovereign wealth fund entered into an addendum to the share purchase agreement, signed on March 27, 2019.

Under this addendum, the purchase price will be paid over several installments pursuant to a seller loan provided by the PIF.

Loan payments, which are represented by promissory notes, are payable between August 2, 2020 (the first payment) and April 7, 2028 (the last payment) in nine installments as follows:

On or before August 2, 2020, an amount equal to $7 billion; on or before April 7, 2021, an amount equal to $5 billion; on or before April 7, 2022, an amount equal to $8.5 billion plus a loan charge of $500 million;on or before April 7, 2023, an amount equal to $10.5 billion plus a loan charge of $500 million; on or before April 7, 2024, an amount equal to $10.5 billion plus a loan charge of $600 million; on or before April 7, 2025, an amount equal to $10.5 billion plus a loan charge of $800 million; on or before April 7, 2026, an amount equal to $17.1 billion plus a loan charge of $1.5 billion; on or before April 7, 2027, a loan charge of $1 billion; andon or before April 7, 2028, a loan charge of $1 billion.

Saudi Aramco has also agreed to make an advance payment of $3 billion in April 2022, based on the occurrence of certain oil market conditions in 2021.

The deal was financed by Saudi Aramco through promissory notes to the fund.

Saudi Aramco will fully consolidate SABIC’s financial results. In accordance with its accounting policies, Saudi Aramco will ccount for three of SABIC’s affiliates, namely Al-Jubail Petrochemical Company (KEMYA), Saudi Yanbu Petrochemical Company (YANPET) and Eastern Petrochemical Company (SHARQ), as joint ventures and one affiliate, Saudi Methacrylates Company (SAMAC), as a joint operation.

These affiliates have historically been fully consolidated by SABIC.

The giant oil producer added that SABIC’s acquisition comes as part of its long-term downstream strategy to grow its integrated refining and petrochemicals capacity and create value from integration across the hydrocarbon chain.

It enhances Saudi Aramco’s chemicals strategy through transforming Saudi Aramco into one of the major global petrochemicals players, integrating upstream and refining with SABIC, and expanding capabilities in procurement, supply chain, manufacturing, marketing and sales.

The deal also complements Saudi Aramco’s geographic presence, projects and partners, and enhances the resilience of cash flows generation.

Following the acquisition, Saudi Aramco added it expects SABIC to benefit from integration with Saudi Aramco’s upstream and downstream refining and chemicals businesses and ability to invest in and carry out major growth projects.

Saudi Aramco expected SABIC’s dividend policy to continue to consider SABIC’s financial position, cash flows and investment plans, and enable SABIC to provide competitive dividends to shareholders while maintaining a strong financial position.

SABIC will be subject to applicable Zakat and tax regulations and the relevant disclosure requirements.

The transaction will provide growth opportunities that are expected to enhance career opportunities for employees of both Saudi Aramco and SABIC.

Saudi Aramco will become the new majority shareholder of SABIC. It will have the ability to elect the majority of the SABIC’s board, which will continue to comprise nine directors, the statement added.