Saudi Arabia doubles sovereign fund's stake in Aramco
By Pesha Magid, Yousef Saba and Clauda Tanios
RIYADH (Reuters) -Saudi Arabia transferred an 8% stake in Aramco to the country's Public Investment Fund, as the kingdom reorganises its holdings to boost the sovereign wealth fund ahead of a potential public offering in the oil giant.
The stake is worth roughly $163.6 billion, according to Aramco's market capitalisation, LSEG data shows.
Saudi Arabia is poised to sell more shares in Aramco later this year, sources told Reuters last month, which could boost financing for the kingdom's ambitious economic reform agenda known as Vision 2030.
PIF declined to comment on which entities the additional shares would be transferred to.
The fund has held a 4% stake in Aramco since 2022 and indirectly holds another 4% that was transferred last year to Sanabil, which it wholly owns.
The transfer "is a continuation of Saudi Arabia's long-term initiatives to boost and diversify the national economy and expand investment opportunities in line with Saudi Vision 2030," state news agency SPA said on Thursday, citing Crown Prince Mohammed bin Salman, who is known as MBS and chairs PIF.
"The transfer will also solidify PIF's strong financial position and credit rating," SPA added.
PIF has raised $7 billion from two separate debt sales this year, taking advantage of strong investor demand for emerging-market issuers.
Its total debt is estimated at around $36 billion, Global SWF said in a report dated Feb. 29, adding that the sovereign fund was unlikely to halt its borrowing spree.
"The transfer will provide (the PIF) with over $9 billion in annual dividend revenue from Aramco," said Justin Alexander, director of Khalij Economics and GCC analyst for GlobalSource Partners.
PIF Governor Yasir al-Rumayyan, who also chairs Aramco, said last month the fund planned to increase its deployment of capital to $70 billion a year after 2025, from $40 billion to $50 billion currently.
Aramco's shares closed at 31.75 riyals ($8.47) on Thursday, slightly below their 2019 IPO price of 32 riyals, giving it a market capitalisation of nearly $2.05 trillion.
MBS AND PIFPIF is central to the crown prince's plan to diversify the economy by building new industries and what PIF refers to as giga-projects.
The project has transformed the fund from a sleepy sovereign investor into a global investment vehicle that makes multi-billion dollar bets on anything from technology to sports.
PIF invested $31.5 billion last year to become the world's top spending sovereign wealth fund.
Before the transfer announced on Thursday, it had roughly $700 billion in assets under management and aims to grow that to $2 trillion by 2030.
"This is a private transfer and the Company is not a party to the transfer and did not enter into any agreements or pay or receive any proceeds from the transfer," Aramco said in a filing on the Saudi Exchange.
"The transfer will not affect the Company's total number of issued shares, and the shares transferred will rank equally alongside other existing ordinary shares in the Company," it said, adding it would have no impact on its operations, strategy, dividend policy or governance framework.
The state holds 82.186% of Aramco following the transfer, said Aramco, which reports fourth quarter results on Sunday.
The Saudi government is reliant on Aramco's generous payouts, including royalties, a base dividend and an additional performance-linked dividend introduced last year.
The state has infused huge amounts of cash into PIF, including a $40 billion transfer in 2020, as it seeks to overhaul the economy and cut reliance on oil revenue.
Among its long list of endeavours, NEOM is a planned futuristic city in the desert that is set to host the 2029 Asian Winter Games. MBS said in July 2022 that NEOM would publicly list this year and that its first phase alone would cost about $320 billion.
"The funding requirements for progressing with various projects is increasing," said Monica Malik, chief economist at Abu Dhabi Commercial Bank.
"The move reflects both the central role of the PIF in driving economic diversification and the importance of oil revenues for funding the investment programme. The government will likely receive a smaller share of the overall dividend payment, but the main objective is to progress with economic transformation."
(Reporting by Clauda Tanios, Yousef Saba, Rachna Uppal in Dubai and Pesha Magid in Riyadh; writing by Yousef Saba and Nadine Awadalla; editing by Maha El Dahan, Susan Fenton, Kirsten Donovan and Barbara Lewis)