Saudi Aramco announced today, Wednesday, the completion of the acquisition agreement to acquire a 70% stake in the Saudi Basic Industries Corporation (SABIC) from the Public Investment Fund, the country's sovereign fund, while experts confirmed that only Aramco had to fund this deal in installments in view of the current circumstances .
The company said in a statement directed to the Saudi Stock Exchange (Tadawul) that the purchase price it paid to acquire the share of the public investment fund in SABIC amounted to 259 billion and 125 million Saudi riyals ($ 69.1 billion), which is equivalent to about 123.4 Saudi riyals per share.
The company added that it would repay the installments value of the acquisition in 9 installments until the year 2028, instead of a previously agreed deadline in the year 2025, noting that the deal will be fully funded by issuing payment orders in favor of the Public Investment Fund.
The first batch will be before August 2, at $ 7 billion and then $ 5 billion until April 7, 2021.
Aramco - the largest oil company in the world - had signed in March 2019 a acquisition deal for 70% of SABIC.
Integration
Aramco said that the acquisition of a shareholding in SABIC will transform Aramco into one of the largest international companies in the petrochemical sector, and achieve integration between the exploration, production, refining and processing sectors with SABIC.
The president of Aramco and its chief executive officer, Amin Al-Nasser, said that the acquisition represents a major step towards more integration and diversification of income sources.
Al-Nasser added in a statement to the company today, Wednesday, that "despite the challenges of the pandemic of the emerging Corona virus, which forced many companies to reconsider or review their long-term strategies, our vision, stiffness and financial flexibility enjoyed by Saudi Aramco, enabled us to complete this historic deal." .
For its part, SABIC said today that the 30% stake of its shares - offered for public circulation - will not be part of the deal, stressing that there is no financial impact on the total unified ownership rights, nor on the net consolidated income related to its shareholders.
She said that Saudi Aramco may not dispose of its shares within the six months following its acquisition of this percentage, without obtaining prior approval from the Capital Market Authority and in accordance with the conditions it sets.
Stressful conditions
In a statement to Al-Jazeera Net, the General Manager of "Namaa" Financial Consulting Company, Taha Abdel-Ghani, said that Aramco had no choice in the current circumstances other than financing the acquisition of a 70% stake in SABIC in installments for seven years.
Abdel-Ghani added that the drop in oil prices and lack of liquidity due to the Corona pandemic on the one hand and the decline in the share price of Aramco, may have prevented the company from resorting to borrowing from financial institutions for its high cost, or to put more of its shares on sale in international markets because of fears of declining confidence.
For his part, financial analyst Nidal Khouli said that Aramco has resorted to the Public Investment Fund to finance the deal in installments, perhaps because of its unwillingness to overburden the local banks by requesting large amounts of money at a time when these banks need these funds in light of the tight liquidity due to the Corona pandemic.
Khouly said in an interview with Al Jazeera Net that Aramco may have resorted to the option to pay in installments, in order to avoid further delay to complete this transaction.
Aramco had expressed earlier this year its intention to sell more of its shares to provide the necessary financing to implement the diversification plan for the Saudi economy, but Bloomberg said at the time that any offering of Aramco shares outside Saudi Arabia would face great difficulties.