Aramco-SABIC deal negotiated on ‘purely’ commercial basis: Nasser

Saudi Aramco’s negotiation with the Public Investment Fund (PIF) for buying its stake in Saudi Basic Industries Corporation (SABIC) was completed on a ‘purely’ commercial basis, Aramco President and CEO Amin Nasser, told Al-Arabiya TV.

He further explained that the valuation was based on a long-term outlook to create value, rather than the stock price in the near term.

“The global chemicals industry is witnessing strong growth. Accordingly, the valuation shall not be based on the current economic slowdown and lower prices,” Nasser stressed.

The giant oil producer relied on conventional methodologies to evaluate the price, including the cash flow analysis, trading multiples of peers and previous transactions’ multiples.

The current COVID-19 fallout and global market conditions will not last for a long time, he also said.

“We are optimistic. The deal comes in line with our long-term outlook and strategy, which aims to create value instead of focusing on the short-term stock price,” Nasser noted.

The world’s largest oil producer financed the deal from its cash flows and some loans, Nasser explained, adding that the transaction will deliver solid returns.

On the other hand, he said that oil consumption in the chemicals industry is growing, ensuring the oil market sustainability over the next 20-40 years.

Saudi Aramco and SABIC’s combined petrochemicals production stands at nearly 90 million tons, based on data issued in 2019.

On Aramco’s future acquisition plans, Nasser highlighted that the company focuses on long-term investments and studies projects in light of market conditions and its financial solvency.

Saudi Aramco announced completing the purchase of a 70% stake in SABIC on June 16, for a total price of SAR 259.125 billion ($ 69.1 billion), or SAR 123.39 price per share.