Saudi Aramco said on Thursday that it intends to make a purchase of a stake in Saudi petrochemical producer SABIC, a move that could enhance the state oil giant’s market valuation ahead of a planned initial public offering, CNBC informed.
Aramco issued a statement saying that it was in “very early-stage discussions” with the kingdom’s Public Investment Fund to acquire the stake in SABIC via a private transaction. It has no plans to acquire any publicly held shares, it said.
In a separate statement, the PIF also said that talks about a sale were in early stages. “There is a possibility that no agreement will be reached in relation to this potential transaction,” it said.
Reuters reported on Wednesday that Saudi Aramco had asked the banks to pitch for an advisory role on the potential acquisition of a strategic stake in Saudi Basic Industries Corp, citing two sources with direct knowledge of the matter.
Aramco wants to evolve its downstream business as the government prepares to sell up to 5 percent of the world’s largest oil producer, possibly by next year. Boosting its petrochemicals portfolio further could help attract investors for the IPO.
Riyadh-listed SABIC, the world’s fourth-biggest petrochemicals company, is 70 percent owned by the Public Investment Fund (PIF), Saudi Arabia’s top sovereign wealth fund. It has a market capitalization of 385.2 billion Saudi riyals ($102.7 billion).
The Aramco IPO is the centerpiece of an ambitious project promoted by Crown Prince Mohammed bin Salman to diversify Saudi Arabia’s economy beyond oil.
Aramco invited the banks for the SABIC deal last month, said the sources, declining to be identified due to commercial sensitivities.
Aramco intends to enhance investments in refining and petrochemicals in order to secure new markets for its crude, and sees growth in chemicals as central to its downstream strategy to lessen the risk of a slowdown in oil demand.
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