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Saudi Aramco signs agreement to acquire 70% stake in SABIC for $69.1 billion

London — Saudi Aramco on Wednesday said it had signed a deal to acquire a 70% majority stake in petrochemical company SABIC for $69.1 billion, following months of negotiations.

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Aramco is purchasing the stake from Saudi Arabia's sovereign Public Investment Fund, the vehicle by which the kingdom aims to finance ambitious reforms intended to diversify its economy away from a reliance on oil revenues.

The transaction, which Aramco said is subject to regulatory approvals and other conditions, will enable the state-owned oil giant to continue its downstream push and paves the way for an eventual - though by no means decided - public listing of its shares, which officials have said could happen in 2021.

"SABIC is a good strategic fit and a solid platform to support our continued investment for future growth in petrochemicals - the fastest growing sector of oil demand," Abdulaziz al-Judaimi, Aramco's senior vice president of downstream, said in a statement.

Aramco plans to increase its global refining capacity to 8 million-10 million b/d by 2030, from its current 4.9 million b/d. Of the planned capacity, about 2 million-3 million b/d will be converted to petrochemical products.

SABIC, whose shares are listed in Riyadh, has a petrochemical production capacity of 62 million mt/year, compared to 17 million mt/year for Aramco, according to the companies.

The transaction will see Aramco pay Riyals 259.125 billion ($69.1 billion) for the 70% stake. Aramco said it had no plans to acquire the remaining 30% of publicly traded SABIC shares.

Aramco officials have previously said they may issue about $10 billion in bonds in the second quarter of 2019 to help fund the purchase. The offering would be Aramco's first international bond sale.

The long-mooted initial public offering of up to 5% of Aramco's shares was to be the centerpiece of Saudi Arabia's Vision 2030 economic reforms.

But amid internal disagreements over how to proceed with the listing and a lackluster oil price environment, it was shelved last year in favor of the SABIC acquisition. Aramco officials said they would prefer to fully digest the SABIC transaction first before proceeding with the IPO, which now has a target date of 2021.

-- Herman Wang, herman.wang@spglobal.com

-- Edited by Jonathan Fox, newsdesk@spglobal.com