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Saudi Arabian Oil Co (64EZ)

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Wednesday 17 June, 2020

Saudi Arabian Oil Co

Saudi Aramco Announcement

RNS Number : 2118Q
Saudi Arabian Oil Company
17 June 2020
 

 

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Saudi Arabian Oil Co (Saudi Aramco) Announces Purchase in the Amount of SAR 259.125 billion (US$ 69.1 billion), equating to SAR 123.39 Price per Share, for 70% Stake in Saudi Basic Industries Corporation (SABIC) from the Public Investment Fund (PIF), the Sovereign Wealth Fund of Saudi Arabia

 

 

 

 

Asset Type

Share Acquisition of a 70% stake in Saudi Basic Industries Corporation (SABIC).

Transaction Value

The purchase price paid by Saudi Aramco for PIF's 70% stake in SABIC is a sum of SAR 259.125 billion (US$ 69.1 billion). This equates to SAR 123.39 price per share.

Announcement Title

Saudi Arabian Oil Co (Saudi Aramco) (Tadawul: 2222) announces purchase in the amount of SAR 259.125 billion (US$ 69.1 billion), equating to SAR 123.39 price per share, for 70% stake in Saudi Basic Industries Corporation (SABIC) from the Public Investment Fund (PIF), the sovereign wealth fund of Saudi Arabia.    

 

 

 

Introduction

Saudi Arabian Oil Co (Saudi Aramco) announces the completion of its share acquisition of a 70% stake in Saudi Basic Industries Corporation (SABIC) from the Public Investment Fund (PIF), the sovereign wealth fund of Saudi Arabia.  

Transaction Details

Following the receipt of all necessary regulatory clearances in all pre-closing notification jurisdictions, on June 16, 2020, Saudi Aramco completed its acquisition of a 70% stake in SABIC from PIF.

Transaction Value

The purchase price paid by Saudi Aramco for PIF's 70% stake in SABIC is a sum of SAR 259.125 billion (US$ 69.1 billion). This equates to SAR 123.39 price per share.

Transaction Terms

On June 16, 2020, Saudi Aramco and PIF entered into an addendum to the share purchase agreement entered into by the parties on March 27, 2019 (the "Addendum").  Pursuant to the Addendum, the purchase price amount will be paid over several installments pursuant to a seller loan provided by PIF. Loan payments , which are represented by promissory notes, are payable between August 2, 2020 (being the first payment) and April 7, 2028 (being the last payment) as follows:

 

i.  on or before August 2, 2020, an amount equal to US$ 7 billion;

ii.  on or before April 7, 2021, an amount equal to US$ 5 billion;

iii. on or before April 7, 2022, an amount equal to US$ 8.5 billion plus a loan charge of US$ 500 million;

iv. on or before April 7, 2023, an amount equal to US$ 10.5 billion plus a loan charge of US$ 500 million;

v.  on or before April 7, 2024, an amount equal to US$ 10.5 billion plus a loan charge of US$ 600 million;

vi. on or before April 7, 2025, an amount equal to US$ 10.5 billion plus a loan charge of US$ 800 million;

vii. on or before April 7, 2026, an amount equal to US$ 17.1 billion plus a loan charge of US$ 1.5 billion;

viii.  on or before April 7, 2027, a loan charge of US$ 1 billion; and

ix. on or before April 7, 2028, a loan charge of US$ 1 billion.

Saudi Aramco has also agreed to make an advance payment of US$ 3 billion in April 2022 based on the occurrence of certain oil market conditions in 2021.

 

Parties of the Transaction

Saudi Aramco and PIF.

Transaction Funding Method

Saudi Aramco's overall approach to financing the SABIC transaction adheres to Saudi Aramco's corporate financing strategy which is based upon prudence and financial flexibility while preserving Saudi Aramco's premium credit profile.

 

Saudi Aramco has funded the transaction through promissory notes issued to PIF at closing.

Transaction Execution Date

June 16, 2020

Description of the Business of the Asset forming the Subject Matter of the Transaction

SABIC is a global diversified chemicals company, headquartered in Riyadh, Saudi Arabia. SABIC manufactures on a global scale in the Americas, Europe, Middle East and Asia Pacific, making different products, including chemicals, commodity and high performance plastics, specialties, agri-nutrients and metals.

Financial Statements for the Last Three Years of the Asset forming the Subject Matter of the Transaction

SABIC's 2017-19 audited financial statements are available at www.sabic.com.

 

Saudi Aramco will fully consolidate SABIC's financial results. In accordance with its accounting policies, Saudi Aramco will account for three of SABIC's affiliates, namely Al-Jubail Petrochemical Company ("KEMYA"), Saudi Yanbu Petrochemical Company ("YANPET") and Eastern Petrochemical Company ("SHARQ"), as joint ventures and one affiliate, Saudi Methacrylates Company ("SAMAC"), as a joint operation.  These affiliates have historically been fully consolidated by SABIC.

Transaction reasons

The acquisition of the SABIC stake is consistent with Saudi Aramco's long-term Downstream strategy to grow its integrated refining and petrochemicals capacity and create value from integration across the hydrocarbon chain.

 

It specifically enhances Saudi Aramco's chemicals strategy by:

· Transforming Saudi Aramco into one of the major global petrochemicals players

· Integrating upstream and refining with SABIC  

· Expanding capabilities in procurement, supply chain, manufacturing, marketing and sales

· Complementing geographic presence, projects and partners, and

· Increasing the resilience of cash flow generation with synergistic opportunities

Expected Impact of the Transaction on the Company and its Operations

As a member of the Saudi Aramco group, SABIC's strategy will fully support Saudi Aramco's strategy.

 

Saudi Aramco expects SABIC to benefit from integration with Saudi Aramco's Upstream and Downstream refining and chemicals businesses and ability to invest in and execute major growth projects.

 

As a condition to the closing of the transaction, the SABIC bylaws were recently amended by the Extraordinary General Assembly of SABIC.

 

Saudi Aramco expects that SABIC's dividend policy will continue to consider SABIC's financial position, cash flows and investment plans, and enable SABIC to provide competitive dividends to shareholders while maintaining a strong financial position.

 

SABIC will be subject to applicable Zakat and Tax regulations and associated disclosure requirements.

 

It is expected that the transaction will provide growth opportunities that are expected to enhance career opportunities for employees of both Saudi Aramco and SABIC.

Related Parties

Saudi Aramco and PIF are controlled by the Government of Saudi Arabia and are therefore deemed to be related parties.

Additional Information

As the new majority shareholder of SABIC, Saudi Aramco has the ability to elect the majority of the SABIC Board, which will continue to comprise nine (9) directors.

 

Saudi Aramco expects the SABIC Board to focus on strategic alignment with the Saudi Aramco group and the creation of value for SABIC and all of its shareholders.

 

A Joint Press Release can be accessed through this link:

http://www.rns-pdf.londonstockexchange.com/rns/2118Q_1-2020-6-17.pdf


This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact [email protected] or visit www.rns.com.
 
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