Page 18 - DMEA Annual Review 2021

DMEA AUGUST DMEA

Higher valuation for

Aramco’s RIL deal

Greater detail about Aramco’s planned share exchange with Reliance
illustrates the benefits to the Saudi firm of guaranteeing offtakers for its crude

MIDDLE EAST SAUDI Aramco’s proposed deal to acquire a those that could invest, with Chinese NOCs
20% stake in the downstream business of India’s likely to form a consortium. Meanwhile, another
Reliance Industries Ltd (RIL) could cost the source at a state-backed private equity fund said
WHAT: company $5bn-10bn more than previously that Aramco has been courting Chinese inves-
The deal would involve anticipated. tors for several years, with CIC the most likely
Aramco trading 1% of its According to a report this week by Bloomb- to pull the trigger. The Silk Road Fund was also
shares for a 20% stake erg, the all-stock deal to buy the participation reported to have been approached.
in Reliance’s oil-to- in RIL’s oil-to-chemicals (O2C) division would MbS noted: “There are talks with other com-
chemicals business. come in at around $20-25bn, equating to around panies for different stakes, and part of Aramco’s
1% of the Saudi firm’s share capital. shares could be transferred to the [Saudi] Public
WHY: The agreement had been widely expected to Investment Fund [PIF] and [another] part listed
This assumes a $20bn cost roughly $15bn, giving Reliance O2C a valu- on the Saudi bourse.”
deal valuation in a ation of $75bn, but the latest report suggests the In late 2019, the Saudi government sold a
deal that will create a Indian firm’s value would be $100bn-125bn. stake of 1.5% in Aramco in the company’s initial
symbiotic relationship The sources said that an announcement is public offering (IPO) on the Tadawul All Share
between the parties. likely to be made in the next few weeks. If the Index (TASI), the Saudi stock exchange. This
transaction proceeds, it will be Aramco’s first raised $25.6bn, making it the world’s largest-ever
WHAT NEXT: all-stock deal since its world record initial public IPO, with a further 0.23% sold later increasing
If the deal proceeds, it offering (IPO) in 2019. the return to $29.4bn. This was duly transferred
will see Aramco further to the PIF, which is the country’s main sovereign
fulfil its key objective of Aramco shares wealth fund.
adding to its dedicated The potential swap of shares with Reliance sug- In January this year, MbS said that more
crude outlets which gests that the Indian firm was the subject of com- shares in Aramco would be sold in order to
shelter the firm from ments by Saudi Crown Prince Mohammed bin expand the PIF. “There will be [more] Aramco
market volatility. Salman (MbS) who said in April that talks were share offerings in the coming years, and this
ongoing for a company to acquire a minority cash will be transferred to the Public Invest-
share in the company. ment Fund,” he said, noting that the PIF would
During a televised interview, he said: “I don’t use the proceeds to invest both locally and
want to give any promises, but there’s a discus- internationally.
sion for acquisition of a 1% stake by a leading
global energy company in an important deal that Deal Progress
would boost Aramco’s sales in a major country,” During its Q2 earnings call earlier this month,
MbS said, with sources quoted by several pub- Aramco said that it was continuing to carry out
lications as saying that Chinese investors were due diligence on the proposed RIL deal.
involved. This follows around two years of protracted
Following the interview, Reuters quoted peo- negotiations between the two companies since
ple close to sovereign wealth fund China Invest- news of the planned investment was announced
ment Corp. (CIC) as saying that it was among in August 2019.

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