Aramco will buy control of Sabic for $70 billion

In a move that will instantly make it one of the world’s largest chemical companies, the Saudi state oil company Saudi Aramco is buying a 70% stake in the petrochemical maker Sabic from the Public Investment Fund of Saudi Arabia, the country’s sovereign wealth fund, for $69 billion.

Aramco has been pushing into petrochemicals in recent years to diversify the Saudi economy away from crude oil exploration and export, especially given the expectation of slowing fuels demand in the coming decades. Late last year, Aramco pledged $100 billion toward petrochemical projects, including a proposed crude-to-chemicals complex in Saudi Arabia with Sabic. The company recently started up a $20 billion joint venture, Sadara, with Dow Chemical.

H.E. Yasir Othman Al-Rumayyan, managing director of the Public Investment Fund, says the purchase “will introduce a strategic owner that can add considerable value to Sabic and all its shareholders.” The remaining 30% of Sabic will continue to trade publicly.

Sabic had sales last year of $45 billion. It’s the world’s fourth-largest chemical maker, according to C&EN’s most recent Global Top 50 ranking. The Saudi government established the firm in the late 1970s to convert oil exploration byproducts such as ethane, which were being flared, into marketable products such as ethylene glycol and polyethylene. From that base, Sabic expanded internationally with acquisitions in the first decade of the 2000s of GE Plastics and the European petrochemical businesses of Huntsman and DSM.

Last year, seeking to get deeper into specialties, Sabic purchased a 25% stake in the Swiss firm Clariant. And it aims to establish a toehold in the US petrochemical market through a proposed ethylene cracker joint venture with ExxonMobil.