Saudi Aramco is considering a bond issue to buy a 70% stake in Sabic.
Link here.
- again, a 70% stake; essentially owning the company
- $50 to $70 billion price point
- huge implications for EU's petrochemical industry
From the linked article, three takeaways:
First:
The money from the acquisition will flow into the Public Investment
Fund, which is responsible for the distribution of funds that will go
into all the ambitious Saudi projects aimed at steering the economy away
from just oil and into new directions. Given that both Aramco and Sabic
are state-owned companies, the transaction will effectively mean taking
the money from one pocket and transferring it to the other.
Second:
There is one problem with bond financing, though: Aramco would have to
disclose its financial position, which is currently as much of a mystery
as the size of China’s strategic petroleum reserve. According to some,
the company’s unwillingness to disclose financial information was among
the reasons for the delays of the initial public offering. But lenders
would want to know this information before they part with their money,
which puts Aramco in a difficult position.
Third:
The WSJ’s sources note that neither Aramco nor Sabic are too thrilled
with the idea of a tie-up. Still, they don’t really have a say, it
seems: prince Mohammed’s diversification plans need cash and a bond
issue is one relatively safe way to get it if the underwriters convince
the lenders they can trust Aramco.
All things being equal, Saudi Arabia will have to increase oil production to meet ever-increasing domestic demand (refining) and maintain current levels of exports.
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