Saudi’s PIF selects Goldman Sachs, BofAML as advisers on SABIC sale

Saudi Arabia’s sovereign wealth fund has chosen Goldman Sachs, Bank of America Merrill Lynch and Michael Klein as advisers on its planned sale of a stake in petrochemicals firm SABIC to Saudi Aramco, sources familiar with the process said.

Citigroup Inc has won the mandate to advise Saudi Basic Industries Corp (SABIC), two of the sources said on Monday, while Reuters previously reported that JPMorgan and Morgan Stanley are advising Aramco.

Read: JPMorgan, Morgan Stanley picked to advise on Aramco’s SABIC deal

Goldman, Citigroup and BAML declined to comment. Michael Klein, whose firm is also known as M. Klein & Company, did not immediately respond to a request for comment.

State-owned oil company Aramco plans to buy a controlling stake in SABIC, possibly taking the sovereign Public Investment Fund’s (PIF) entire 70 per cent holding.

Read: Saudi Aramco aims to buy controlling stake in SABIC

The deal mandate is a major win for Goldman Sachs, which like other Western investment banks has built up its Saudi business to capitalise on the government’s plans to privatise assets and diversify the oil-dominated economy.

Klein was previously picked to advise Saudi Arabia on its planned flotation of Saudi Aramco and has experience working on big chemicals deals, including acting for Dow Chemical on its $130 billion merger with DuPont in 2015.

Investment banking fees in Saudi Arabia are modest compared to elsewhere, while risks are high, making the SABIC deal an especially coveted prize. Riyadh recently shelved plans to float Aramco and has postponed an airport privatisation on which Goldman was advising.

Goldman began operating in Riyadh in 2009 and obtained new licenses in 2014 and 2017 that have allowed it to expand. It bought a portion of Aramco’s $10bn credit facility last year in an attempt to secure a role in the IPO.

Citigroup has also sought to rebuild its presence in Saudi Arabia after an absence of almost 13 years. In January, it won approval to begin investment banking operations there.

M&A RECORD

If Aramco acquires the full SABIC stake, valued at around $70bn, it will be the kingdom’s biggest M&A deal and provide a boost to the oil major’s downstream business.

SABIC has recently boosted its own holdings, buying a 25 per cent stake in Swiss specialty chemical maker Clariant in January. That deal initially faced regulatory delays, but has now been cleared to proceed.

The deal will also provide an alternative source of cash to the PIF, after an initial public offering of Aramco that was supposed to raise $100bn was shelved.

Analysts estimate the PIF has around $250bn worth of assets under management. It said last year that it aims to increase its financial clout to around $400bn.

It already owns stakes in many companies across the kingdom and plans to beef up its overseas expansion, including pledges of $20bn to a fund with US private equity firm Blackstone and $45bn to SoftBank’s Vision Fund.

Read: Saudi’s PIF appoints former Dow Chemical CEO Liveris as adviser

Proceeds from the sale of Riyadh-listed SABIC, the world’s fourth largest petrochemicals company, are likely to help fund planned investments at home and abroad.

The PIF and SABIC were not available for immediate comment.