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    2010   SA0007879121

SAUDI BASIC INDUSTRIES CORPORATION

(2010)
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Saudi Aramco to buy SABIC in $69 billion chemicals megadeal

03/27/2019 | 01:59pm EDT
FILE PHOTO: The headquarters of Saudi Basic Industries Corp (SABIC) is seen in Riyadh, Saudi Arabia

RIYADH/DUBAI (Reuters) - The world's largest oil producer Saudi Aramco has agreed to buy a 70 percent stake in Saudi Basic Industries Corp (SABIC) from the kingdom's wealth fund for $69.1 billion (£52.3 billion) in one of the biggest deals in the global chemical industry.

The agreement to help boost Aramco's downstream growth plans comes after months of talks between Aramco and the Public Investment Fund (PIF), which contributed to the delay of Aramco's planned multi-billion dollar initial public offering.

"This is a win-win-win transaction and a transformational deal for three of Saudi Arabia's most important economic entities," said Yasir al-Rumayyan, managing director of the PIF.

The deal could inject billions of dollars into the PIF, giving it the firepower to proceed with its plans to create jobs and diversify the largest Arab economy beyond oil exports, including a mega business zone in the northwest of the country.

Aramco has been increasing its investments in refining and petrochemicals to secure new markets for its crude, as it sees growth in chemicals as central to its downstream expansion strategy.

SABIC and Aramco said in a statement the agreed purchase price was 123.39 riyals per share, a slight discount from SABIC's closing price on Wednesday.

"Share price at 123.4 is fair given it is a strategic, long-term investment and given that SABIC is one of the most defensive, uncyclical segments as its growth is mainly related to population growth," said Mazen al-Sudairi, head of research at Alrajhi Capital.

"We think it's a fair offer and makes sense from a pure valuation perspective," said Yousef Husseini, an analyst at EFG-Hermes.

Aramco's Chief Executive Amin Nasser said the deal - which is subject to certain closing conditions, including regulatory approvals - represented an "historic moment" and a "great opportunity for growth," Saudi-owned broadcaster Al Arabiya reported.

He told Al Arabiya there were a number of options to finance the deal. "Cash, borrowing and bonds are all available to us," he said.

The Saudi economy was "the biggest winner," Energy Minister Khalid al-Falih said in a tweet.

Aramco said it has no plans to buy the remaining shares in SABIC, the world's fourth-biggest petrochemicals firm.

"Solidifying our relationship in this way strategically positions SABIC and Saudi Aramco to accelerate exciting developments in our global chemicals business," said Yousef Al-Benyan, SABIC Vice Chairman and CEO.

Aramco plans to increase its refining capacity from 4.9 million to 8-10 million barrels per day by 2030.

Saudi Aramco and SABIC have petrochemicals production capacity of 17 and 62 million tons per year, respectively.

"We think that Aramco will now run all of its future expansion plans directly through SABIC, and with a big part of the 2030 vision focused on expanding petchems, this only bolsters SABIC's long-term growth potential," Husseini said.

BOND ON THE WAY

Aramco is expected to issue its first international bond over the coming weeks, a deal which is likely to partly back the SABIC acquisition, sources previously told Reuters.

An international bond sale by Aramco will almost certainly require the company to obtain a credit rating and disclose financial information in a prospectus, and the oil giant has so far been reluctant to disclose many details of its finances.

Aramco's IPO initially planned for 2018 has been postponed. Saudi officials have said the new date for the public offering is now 2021 due to the world's top oil producer's plan to acquire the strategic stake in SABIC.

Aramco CEO Nasser told Al Arabiya he expected the IPO to happen in 2021 and that the company needed at least a year from the deal's completion before the IPO, so that Aramco financial statements can reflect the SABIC acquisition.

A major goal of the planned Aramco listing - which was initially slated for the end of 2018 and could prove the biggest IPO in history - was to raise money for the PIF, making the fund an engine for transforming the Saudi economy.

"Aramco's financials are not public, but financing won't be a problem, given it has triple production capacity of Exxon Mobil, which has an AAA rating," said Alrajhi Capital's al-Sudairi.

JPMorgan and Morgan Stanley were picked to advise Aramco on the SABIC acquisition, Bank of America Merrill Lynch, Goldman Sachs and Michael Klein have won roles advising PIF on the sale of its stake, and Citigroup advised SABIC, sources told Reuters last year.

(Additional reporting by Saeed Azhar in Dubai and Nayera Abdallah in Cairo, writing by Davide Barbuscia; Editing by Alexandra Hudson and David Evans)

By Marwa Rashad, Rania El Gamal and Hadeel Al Sayegh


© Reuters 2019
Stocks mentioned in the article
ChangeLast1st jan.
BANK OF AMERICA CORPORATION -0.83% 38.36 Delayed Quote.26.56%
BYD COMPANY LIMITED 3.46% 239 End-of-day quote.17.62%
CITIGROUP INC. -1.00% 67.62 Delayed Quote.9.67%
EURO / US DOLLAR (EUR/USD) -0.18% 1.18684 Delayed Quote.-2.65%
EXXON MOBIL CORPORATION -2.31% 57.57 Delayed Quote.39.67%
JPMORGAN CHASE & CO. -0.80% 151.78 Delayed Quote.19.45%
MORGAN STANLEY -0.31% 95.98 Delayed Quote.40.49%
SAUDI ARABIAN OIL COMPANY -0.14% 34.85 End-of-day quote.-0.43%
SAUDI BASIC INDUSTRIES CORPORATION 0.50% 121 End-of-day quote.19.33%
THE GOLDMAN SACHS GROUP, INC. -0.71% 374.88 Delayed Quote.42.16%
VISION INC. -1.91% 1077 End-of-day quote.3.96%
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Financials
Sales 2021 155 B 41 301 M 41 301 M
Net income 2021 17 675 M 4 713 M 4 713 M
Net Debt 2021 2 116 M 564 M 564 M
P/E ratio 2021 19,7x
Yield 2021 3,01%
Capitalization 363 B 96 795 M 96 798 M
EV / Sales 2021 2,36x
EV / Sales 2022 2,33x
Nbr of Employees 35 000
Free-Float 30,0%
Chart SAUDI BASIC INDUSTRIES CORPORATION
Duration : Period :
Saudi Basic Industries Corporation Technical Analysis Chart | 2010 | SA0007879121 | MarketScreener
Technical analysis trends SAUDI BASIC INDUSTRIES CORPORATION
Short TermMid-TermLong Term
TrendsNeutralBullishBullish
Income Statement Evolution
Consensus
Sell
Buy
Mean consensus UNDERPERFORM
Number of Analysts 12
Last Close Price 121,00 SAR
Average target price 112,77 SAR
Spread / Average Target -6,80%
EPS Revisions
Managers and Directors
Yousef bin Abdullah Al-Benyan Vice Chairman & Chief Executive Officer
Timothy D. Leveille Executive Vice President-Corporate Finance
Khalid Hashim Al-Dabbagh Chairman
Bob Maughon Executive Vice President-Technology & Innovation
Khaled Hamza Nahas Independent Director
Sector and Competitors