Page 12 - MEOG Week 19

MEOG FInanCe & InVestment MEOG
Aramco weighs staggering payments for SABIC deal
saudI araBIa
SaUDI aramco is in early talks about further staggering payments for the acquisition of a con- trolling stake in local petrochemical giant Saudi Basic Industries Corp. (SaBIC) as the collapse in oil prices puts pressure on its finances.
State-owned aramco is weighing pushing out payments for the 70% holding in the petrochem- icals maker and reducing the size of the initial instalment to the kingdom’s sovereign wealth fund, known as the Public Investment Fund (PIF), according to people with knowledge of the matter.
The oil giant is also weighing whether it is possible to reduce the $69.1 billion price tag on the deal, one of the people said, asking not to be identified because the information is private. The talks are in their early stages and it’s unclear whether an agreement will be achieved, the peo- ple said.
The company is seeking to preserve cash as it confronts a historic rout in crude prices and a burgeoning list of spending obligations. It reaf- firmed a commitment to pay $75 billion in divi- dends this year, while in March it pledged to cut capital expenditure to save cash.
delayed payment
aramco and the PIF have already restructured the deal. Under the terms of the current agree- ment from October, aramco is set to pay a third of the deal in cash, down from half previously.
The deadline for paying the rest was extended
by four years until September 2025. The ini- tial pact involved aramco paying 123.4 riyals ($32.85) a share for SaBIC, whose share price has slumped to 71.7 riyals since that was agreed in March 2019.
a representative for aramco said it doesn’t comment on rumour or speculation. a repre- sentative for SaBIC said the matter is between the oil producer and the PIF. a representative for the sovereign wealth fund didn’t immediately respond to requests for comment.
Earlier on Sunday, reuters reported that aramco is looking to restructure the deal, citing people familiar with the matter.
The acquisition of SaSBIC is a key part of aramco’s strategy of moving downstream from oil production into chemicals. It will also serve as a way to help the PIF raise cash to fund its invest- ment plans.
SaBIC CEO Yousef al-Benyan told a virtual news briefing last week that aramco has com- mitted to complete the acquisition of a con- trolling stake in SaBIC by the second quarter and he did not see anything that changes this timeline.
The deal could inject billions of dollars into the PIF, giving it the firepower to invest in deals abroad and infrastructure projects at home to create jobs and diversify the largest arab econ- omy beyond oil exports. aramco is also raising a $10 billion loan to back its acquisition of SaBIC, sources have previously told reuters.™
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w w w . N E W S B A S E . c o m Week 19 13•May•2020