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Saudi Aramco reaches $69.1 billion deal to buy majority stake in petrochemicals firm Sabic

Key Points
  • Saudi oil giant Aramco reaches deal to buy majority stake in petrochemicals firm Sabic for $69.1 billion.
  • The 70 percent stake is currently held by Saudi Arabia's sovereign wealth fund.
  • The deal expands Aramco's footprint in refining and petrochemicals and injects cash into the kingdom's Public Investment Fund.
Amin Nasser, CEO, Saudi Aramco
Katie Kramer | CNBC

Saudi Arabia's state-controlled energy giant Aramco has reached a $69.1 billion deal to purchase a majority stake in petrochemicals firm Sabic from the kingdom's sovereign wealth fund.

The deal will see Aramco purchase the 70 percent stake in Sabic held by Saudi Arabia's Public Investment Fund in a share purchase agreement. It will expand Aramco's footprint in refining and petrochemicals and inject cash into PIF, which underpins ambitious plans to remake Saudi Arabia's economy.

Aramco and PIF announced the news Wednesday shortly after CNBC and other news outlets confirmed the transaction. The deal remains subject to closing conditions and regulatory approvals.

"This is a win-win-win transaction and a transformational deal for three of Saudi Arabia's most important economic entities," PIF Managing Director Yasir Othman Al-Rumayyan said in a statement. "It will unlock significant capital for PIF's continued long-term investment strategy, underpinning sectoral and revenue diversification for Saudi Arabia."

Saudi Arabia is attempting to diversify its economy and reduce its reliance on oil revenues under a plan called Vision 2030 directed by Crown Prince Mohammed bin Salman. Plans to sell shares in Aramco are meant to underwrite that endeavor, but an initial public offering on an international exchange has been delayed by several years.

The Aramco-Sabic deal further delayed the IPO plans — the company now expects to list shares in 2021. The kingdom sought to raise $100 billion by publicly listing a small percentage of Aramco.

Wednesday's agreement comes as Aramco, the world's largest oil company by production, is expanding its high-value downstream operations, which includes refining crude oil into fuels and making petrochemicals.

Aramco currently has the capacity to produce 17 million tons of petrochemicals per year, while Sabic's capacity is 62 million tons. By 2030, Aramco aims to increase its refining capacity from 4.9 million barrels per day to 8 million to 10 million bpd.

"This transaction is a major step in accelerating Saudi Aramco's transformative downstream growth strategy of integrated refining and petrochemicals," Aramco President and CEO Amin Nasser said in a statement. "SABIC is a world-class company with an outstanding workforce and chemicals capabilities."

Sabic has operations in 50 countries and employees about 35,000 people around the world.

Investors own the remaining 30 percent stake in Sabic through shares listed on the Saudi stock exchange. Aramco says it does not intend to purchase those shares.

— CNBC Hadley Gamble contributed reporting to this story.