Aramco’s potential SABIC deal to affect IPO timing – CEO

Saudi Aramco’s potential acquisition of a stake in petrochemicals maker SABIC would affect the timeframe of its own planned initial public offering, the firm’s chief executive, Amin Nasser, said in a TV interview.

The offering is the centrepiece of an ambitious plan championed by Crown Prince Mohammed bin Salman to diversify Saudi Arabia’s economy beyond oil, but preparations for the IPO, which could prove the biggest in history, have slowed.

Saudi-owned Al Arabiya television cited Nasser as saying that buying a stake in a petrochemicals company would make the state oil giant less vulnerable to price volatility.

“If the deal is completed, with relevant regulations taken into account, it will definitely affect the timeframe for the partial IPO of Saudi Aramco,” he said in a transcript provided by the government media office.

Aramco said on Thursday it was looking to buy a strategic stake in SABIC, which could boost its market valuation ahead of a planned IPO.

When Aramco is ready to list, the IPO timing would be up to the government to decide, Nasser said.

“As I said in previous interviews, when Saudi Aramco is ready, the decision of going ahead with the IPO is for the state to make,” he said

On Thursday, Aramco said it was in “very early-stage discussions” with the kingdom’s Public Investment Fund (PIF) to acquire the SABIC stake in a private transaction, and had no plans to acquire any publicly held shares.

Riyadh-listed Saudi Basic Industries Corp (SABIC), the world’s fourth-biggest petrochemicals company, is 70 per cent owned by the PIF, Saudi Arabia’s top sovereign wealth fund. It has a market capitalisation of SAR385.2bn ($103bn).

Nasser also said Aramco had a long-term goal to convert 2 million to 3 million barrels of its oil products into chemicals.

Nasser said the proposed deal with Sabic would help balance revenues from excavation and production with those from refining and chemicals, that normally remain strong even when oil prices dip.

Reuters reported on Wednesday that Saudi Aramco had invited banks to pitch for an advisory role on the potential acquisition of a strategic stake in SABIC, citing two sources with direct knowledge of the matter.

Some sources close to the Saudi Aramco IPO process have said the plans for a domestic and international listing might be pushed further into next year or beyond.

A final decision has yet to be made by Prince Mohammed, who oversees the kingdom’s economic and oil policies, the sources said. Saudi Arabia’s energy minister, Khalid al-Falih, said last month it would be “nice” to see Aramco floated in 2019, adding that the timing was not critical to the government.

Aramco plans to boost investments in refining and petrochemicals to secure new markets and sees growth in chemicals as central to its downstream strategy to cut the risk of an oil demand slowdown.