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DMEA PETROCHEMICALS DMEA

Aramco seals SABIC takeover

SAUDI ARABIA SAUDI Aramco has closed its takeover of the SABIC’s plants.
kingdom’s leading petrochemicals manufacturer Aramco announced its bid for SABIC last
Aramco wants to SABIC, as it looks to protect its business from oil year, and the deal has been restructured several
diversify its business price shocks through diversification. times since then. In a bourse filing on June 17,
by expanding in The national oil company (NOC) announced Aramco and PIF noted that the payment struc-
petrochemicals. on June 17 it had bought 70% of the company ture had been amended again. PIF will provide a
from Saudi sovereign wealth fund PIF for loan to fund the purchase, and Aramco will pay
SAR259bn ($69bn), or SAR123.39 per share. back instalments and loan charges until 2028 –
This is 27.5% above the company’s current share three years later than previously agreed. The first
price of SAR89.40, which has come under pres- $7bn tranche is due on or before August 2, 2020,
sure from a collapse in petrochemicals demand and the last, a loan charge of $1bn, on or before
as a result of the coronavirus (COVID-19) April 7, 2028.
pandemic. The transaction was funded through prom-
“It is a significant leap forward, which accel- issory notes issued to PIF when the deal was
erates Aramco’s downstream strategy and trans- concluded on June 16. Previously, 36% of the
forms our company into one of the major global purchase price was due to be paid upfront.
petrochemicals players,” Aramco CEO Amin While Aramco will gain in the long run from
Nasser said in a statement. having a more diversified portfolio, in the short
While claiming to be the lowest-cost oil pro- term SABIC will be a financial burden. The
ducer in the world, Aramco too has been hit company has suffered two consecutive quarterly
hard by the market turmoil in recent months. losses in a row, on weaker demand for petro-
It reported a 25% year-on-year decline in net chemicals in Asia and excess global supply.
profits in the first quarter and its second-quarter The revised payment plan will ease the finan-
numbers will be much weaker. The now-listed cial pressure on Aramco, which had promised to
Aramco is looking to diversify its revenue base pay out $75bn in dividends this year. However,
to shield itself from such volatility. the Saudi government said ahead of the compa-
Besides an extra focus on natural gas, the ny’s initial public offering (IPO) last year that the
NOC also wants to build up its downstream state would give priority to outside shareholders
divisions, including petrochemicals. SABIC can and forgo its right to receive full payment if there
produce up to 62mn tonnes per year of petro- was a cash crunch.
chemicals, while Aramco’s capacity is a mere That is exactly what Aramco is now facing,
17mn tpy. And synergies exist between the pair, having announced a cut to spending to $25bn
with Aramco supplying the feedstock used at this year from $33bn in 2019 to conserve cash. ™

P14 www. NEWSBASE .com Week 24 18•June•2020