SABIC Acquisition Signals Change At Aramco

Transformation Process Funded By US$10 Billion Bond Issue

Oil major Saudi Aramco has progressed transformation plans into a fully integrated petrochemicals conglomerate with the $69.1 billion acquisition of a majority stake in chemicals firm SABIC.
The deal is estimated to be one of the biggest deals in the global chemical industry and will create a giant diversified company. In parallel with the deal, Aramco announced the issuance of a US$10 billion bond.
“Aramco now wants to become an undisputed global energy champion, not just the world’s leading oil producer. It aims to be the leading player in refining and marketing, trading, petrochemicals and global gas. By 2030, it could be the world’s premier integrated oil and gas company,” said Stewart Williams, vice president at natural resources consultancy Wood Mackenzie.

Transformative Downstream Growth
The deal will see Saudi Aramco super charge its transformation plans and double down on investment plans in the wake of its failed initial public offering. The firm now aims to increase its refining capacity to match its huge oil production, with plans to divert 2 million to 3 million barrels per day of oil production to petrochemicals by 2030.

“This transaction is a major step in accelerating Saudi Aramco’s transformative downstream growth strategy of integrated refining and petrochemicals. SABIC is a world-class company with an outstanding workforce and chemicals capabilities. As part of the Saudi Aramco family of companies, together we will create a stronger, more robust business to enhance competitiveness and help meet rising demand for energy and chemicals products needed by our customers around the world,” said Amin Nasser, CEO of Saudi Aramco.

Oil Price Critical

Under the terms of the deal, Saudi Aramco will acquire a 70-percent majority stake in SABIC with the remaining 30 percent publicly traded shares.
 “This is a win-win-win transaction and a transformational deal for three of Saudi Arabia’s most important economic entities. It will unlock significant capital for PIF’s continued long-term investment strategy, underpinning sectoral and revenue diversification for Saudi Arabia,” said Yasir Othman Al-Rumayyan, managing director, Public Investment Fund of Saudi Arabia.

Headquartered in Riyadh, Saudi Arabia, SABIC has global operations in more than 50 countries and handles a consolidated production volume across its various business units of 75 million tonnes.
“Aramco is well placed to succeed. Its low-cost, cash-generating oil business gives it huge financial firepower it can direct towards new business development … There will be challenges. Oil prices are still critical. But Aramco is right to focus initially on the SABIC acquisition. But with its finances there for all to see, many will be now asking what’s next on Aramco’s shopping list,” Williams added.