Saudi’s SAFCO seeks banks for acquisition of SABIC stakes in agri businesses

Saudi Arabia Fertilizers Co (SAFCO) has invited banks to pitch for an advisory role in its potential acquisition of stakes in five agri-nutrients businesses now held by Saudi Basic Industries Corp (SABIC), two sources told Reuters.

SAFCO wants to buy SABIC’s stakes in Al-Jubail Fertilizer Company (Al-Bayroni), National Fertilizer Company (Ibn al-Baytar), Gulf Petrochemicals Industries Company, Ma’aden Phosphate Company, and Ma’aden Wa’ad al Shamal Phosphate Company, said the sources, who declined to be named due to commercial sensitivities.

SABIC owns 43 per cent in SAFCO. Neither company responded to requests for comment.

SABIC said in November it wanted to establish a new company called “SABIC Agri-nutrient Investments” to consolidate its equity stakes and assets currently held in several companies specializing in the production of various agri-nutrient products.

SABIC said it signed a non-binding contract with SAFCO to facilitate the “integration of the newly formed company with SAFCO” after obtaining regulatory and shareholder approval, according to a separate statement in November.

The transaction, SABIC said, was expected to be completed by the end of 2019.

SABIC, the world’s third-largest chemicals company and 70 percent owned by the kingdom’s sovereign wealth fund, is looking to streamline businesses seen as non-core out of the listed SABIC entity.

The transaction would allow SABIC to become more specialised in petrochemical products and focus on its expansion in the sector, and for SAFCO to become more specialised in fertilisers and phosphate.

The transaction comes as oil giant Saudi Aramco looks to buy a controlling stake in SABIC, possibly taking the entire 70 percent stake owned by the sovereign wealth fund, two sources familiar with the matter told Reuters in July.

Saudi Aramco aims to allocate some 2-3 million barrels per day of its crude oil production to petrochemicals, CEO Amin Nasser said in October.

“SAFCO will gain from this, it will be bigger in terms of sales and size of assets. The company will be a bigger fertilizer arm for Sabic,” said Mazen Alsudairi, head of research at Al Rajhi Capital.

SAFCO, Ibn Al-Baytar and Al-Bayroni are in close proximity to each other, and if they consolidate they can redistribute gas allocations from one plant to another if for example one of them is under maintenance, and keep up their efficiency, said Alsudairi.