Saudi Aramco says media reports of SABIC deal troubles “speculative”

Aramco is exploring the potential acquisition of a majority stake in SABIC from the kingdom’s sovereign fund



State oil giant Saudi Aramco on Thursday described media reports of complications in its potential acquisition of a stake in petrochemicals firm SABIC as “entirely speculative”.

The Wall Street Journal reported on Wednesday that Aramco was seeking a discount on the potential 70 per cent stake in SABIC it is looking to acquire from the kingdom’s Public Investment Fund (PIF).

The publication cited sources as saying Aramco executives believe SABIC is overpriced, casting doubt on whether the firm would pay the up to $70bn expected.

The sources said Aramco wanted to pay below the then SAR119 ($32) SABIC share price and the SAR120-125 range wanted by the PIF, with an offer that could be less than SAR100 per share.

SABIC shares have risen 18 per cent this year due to optimism in the Saudi stock market ahead of decisions by index compilers FTSE Russell, MSCI and S&P Dow Jones to upgrade it to emerging market status.

Read: S&P Dow Jones to upgrade Saudi stocks to emerging market next year

“Nobody buys a cyclical stock at all-time highs,” a senior adviser to the Saudi government was quoted as saying.

The acquisition is also said to have been complicated by Aramco’s plans to fund it, which are reported to include $10bn of syndicated bank loans and $40bn in bond offerings over the next two years.

The firm is also considering a leveraged buyout using SABIC’s balance sheet, according to reports.

In a brief Twitter post that didn’t mention the Wall Street Journal article directly, Aramco said: “Recent media reports on the potential Saudi Aramco-Sabic transaction are entirely speculative.”

The firm added it would provide updates “when appropriate”.

Reuters reported earlier this week that the PIF had appointed Goldman Sachs, Bank of America Merrill Lynch and Michael Klein as advisers on the deal.

Read: Saudi’s PIF selects Goldman Sachs, BofAML as advisers on SABIC sale

The potential stake acquisition is seen as a replacement for the listing of Aramco, which was intended to generate up to $100bn for the PIF.

Read: Bruised bankers seek consolation prizes after shelved Saudi Aramco IPO