Saudi Aramco, the world’s largest oil company, is lining up banks to raise money to acquire as much as 70 percent of chemical producer Saudi Basic Industries Corp. in a deal that could value the stake at about $70 billion, according to people familiar with the matter. Some of Wall Street’s biggest lenders are offering Aramco loans for the potential deal between the kingdom’s state-owned oil and petrochemical giants, the people said, asking not to be identified because discussions are private.
Aramco is considering buying 50-70 percent from the Public Investment Fund, the country’s sovereign wealth fund that controls Sabic, the people said. A deal would give the PIF the financial firepower it needs to carry out ambitious investment plans at home and abroad as Aramco’s own initial public offering stalls, two of the people said. The PIF and Aramco declined to comment.
Aramco said last week it’s engaged in “very early-stage discussions” with the PIF to acquire “a strategic interest in Sabic by way of a private transaction” after Reuters reported the considerations. Sabic carries a market value of a little over $100 billion. The PIF controls a 70 percent stake, with the rest listed on the local stock exchange. Aramco has said it doesn’t plan to buy the listed shares.
The PIF, meanwhile, plans to become the world’s biggest sovereign fund, controlling more than $2 trillion by 2030. The fund is a central part of the government’s effort to diversify the economy away from oil, under a plan known as Vision 2030. The sale of about a 5 percent stake in Aramco had been expected to provide funds for investment, though a deal with Sabic could affect the time frame of the offering, Aramco Chief Executive Officer Amin Nasser said last week.
Within two years, the PIF has struck an agreement to invest $45 billion in SoftBank Group Corp.’s technology fund, committed $20 billion to an infrastructure fund with Blackstone Group LP and said it plans to invest about $1 billion in Virgin Group’s space companies.
It’s also behind several large real estate developments in Saudi Arabia, including a planned megacity NEOM, an entertainment city on the edge of Riyadh and another tourism project on the Red Sea. The fund has started approaching banks for its first-ever loan, aiming to establish a group of banks with which it will work on future deals, people familiar with the matter said this month.