Page 4 - AsianOil Week 33 2021

AsianOil SOUTH ASIA AsianOil
Higher valuation for Aramco’s RIL deal
Greater detail about Aramco’s planned share exchange with Reliance Industries Ltd (RIL) illustrates the benefits to the Saudi firm of guaranteeing offtakers for its crude
COMMENTARY
WHAT:
The deal would involve Aramco trading 1% of its shares for a 20% stake in Reliance’s oil-to- chemicals business.
WHY:
This assumes a $20bn deal valuation in a deal that will create a symbiotic relationship between the parties.
WHAT NEXT:
If the deal proceeds, it will see Aramco further fulfil its key objective of adding to its dedicated crude outlets which shelter the firm from market volatility.
SAUDI Aramco’s proposed deal to acquire a 20% stake in the downstream business of India’s Reliance Industries Ltd (RIL) could cost the company $5bn-10bn more than previously anticipated.
According to a report this week by Bloomb- erg, the all-stock deal to buy the participation in RIL’s oil-to-chemicals (O2C) division would come in at around $20-25bn, equating to around 1% of the Saudi firm’s share capital.
The agreement had been widely expected to cost roughly $15bn, giving Reliance O2C a valu- ation of $75bn, but the latest report suggests the Indian firm’s value would be $100bn-125bn.
The sources said that an announcement is likely to be made in the next few weeks. If the transaction proceeds, it will be Aramco’s first all-stock deal since its world record initial public offering (IPO) in 2019.
Aramco shares
The potential swap of shares with RIL suggests that the Indian firm was the subject of comments by Saudi Crown Prince Mohammed bin Salman (MbS) who said in April that talks were ongoing for a company to acquire a minority share in the company.
During a televised interview, he said: “I don’t want to give any promises, but there’s a discus- sion for acquisition of a 1% stake by a leading
global energy company in an important deal that would boost Aramco’s sales in a major country,” MbS said, with sources quoted by several pub- lications as saying that Chinese investors were involved.
Following the interview, Reuters quoted peo- ple close to sovereign wealth fund China Invest- ment Corp. (CIC) as saying that it was among those that could invest, with Chinese NOCs likely to form a consortium. Meanwhile, another source at a state-backed private equity fund said that Aramco has been courting Chinese inves- tors for several years, with CIC the most likely to pull the trigger. The Silk Road Fund was also reported to have been approached.
MbS noted: “There are talks with other com- panies for different stakes, and part of Aramco’s shares could be transferred to the [Saudi] Public Investment Fund [PIF] and [another] part listed on the Saudi bourse.”
In late 2019, the Saudi government sold a stake of 1.5% in Aramco in the company’s initial public offering (IPO) on the Tadawul All Share Index (TASI), the Saudi stock exchange. This raised $25.6bn, making it the world’s largest-ever IPO, with a further 0.23% sold later increasing the return to $29.4bn. This was duly transferred to the PIF, which is the country’s main sovereign wealth fund.
In January this year, MbS said that more
P4
w w w . N E W S B A S E . c o m Week 33 19•August•2021