A Goldman Sachs sign above the New York Stock Exchange floor. Picture: REUTERS/LUCAS JACKSON
A Goldman Sachs sign above the New York Stock Exchange floor. Picture: REUTERS/LUCAS JACKSON

Dubai — 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 won the mandate to advise Saudi Basic Industries (Sabic), two of the sources said on Monday, while Reuters previously reported that JPMorgan and Morgan Stanley are advising state-owned company Aramco.

Aramco plans to buy a controlling stake in Sabic, possibly taking the sovereign Public Investment Fund’s (PIF’s) entire 70% holding. It will provide an alternative source of cash to the fund, after an initial public offering of Aramco that was supposed to raise $100bn was shelved.

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 $130bn merger with DuPont in 2015.

Investment banking fees in Saudi Arabia are modest compared with elsewhere, while risks are high, making the SABIC deal a coveted prize. Riyadh recently postponed an airport privatisation on which Goldman was advising.

Goldman began operating in Riyadh in 2009 and obtained new licences in 2014 and 2017, which have allowed it to expand. It bought a portion of Aramco’s $10bn credit facility in 2017 in an attempt to secure a role in the initial public offering.

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.

If Saudi Aramco acquires the full Sabic stake, valued at about $70bn, it will be the kingdom’s biggest mergers & acquisitions deal and will provide a boost to the oil major’s downstream business. Sabic has recently boosted its own holdings, buying a 25% stake in Swiss speciality chemical maker Clariant in January. That deal has now been cleared to proceed.

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

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.