Dubai: Saudi Crown prince Mohammed bin Salman Al Saud said on Sunday that 4 per cent of Saudi Aramco shares will be transferred to the Kingdom's sovereign wealth fund, Public Investment (PIF).
Saudi Aramco shares making up four percent of the company valued at $80 billion will be transferred to Saudi Arabia’s Public Investment Fund, Crown Prince Mohammed bin Salman said in a statement carried by SPA on Sunday.
The announcement on state media comes as the oil firm is valued just under $2 trillion.
“His Highness added that the transfer of these shares is part of the kingdom’s long-term strategy aimed at supporting the restructuring of the national economy,’’ the SPA report said.
A private deal
Saudi Aramco said in a statement the transfer was a private transaction between the government and the state fund. “The company is not a party to the transfer and did not enter into any agreements or pay or receive any proceeds from that transfer,” it said.
The kingdom remains the largest shareholder in the firm with 94 per cent of Saudi Aramco. It offered shares of the oil firm on Riyadh’s Tadawul stock market in 2019.
Bloomberg reported quoting peopele familiar with the matter that the move follows government’s talks with advisers last week on the potential second offering, which could bring in more than than its initial IPO. Aramco’s 2019 initial public offering - in which it sold about 2 per cent of its stock on the Riyadh bourse - raised almost $30 billion.
Earlier this month rating agency Moody’s Investors Service assigned an A1 long term issuer rating to PIF. PIF’s A1 issuer rating and stable outlook are aligned with those of the Government of Saudi Arabia.
Supporting national economy
Over the past six years, PIF has evolved into becoming one of the Kingdom’s main vehicles to grow the non-oil economy and reduce its reliance on the hydrocarbon sector. PIF’s oversight changed in 2015 when it started reporting to the Council of Economic and Development Affairs (CEDA), chaired by the Crown Prince, from the Ministry of Finance (MOF).
The transfer of shares will bolster the Public Investment Fund’s (PIF) strong financial position and high credit ratings . The state remains the largest shareholder in Saudi Aramco after the transfer process, as it retains more than 94 per cent of the company’s shares.
The transfer of existing shares would help to boost PIF’s assets under management, which are targeted to grow to about 4 trillion riyals ($1.07 trillion) by the end of 2025.
Diversified portfolio
PIF’s portfolio has grown substantially in the last six years since the change of oversight in 2015 with the Fund becoming an impactful and strategic investor. Moody’s expects its size to grow further in the next few years. The Fund’s assets under management have increased to SAR1.54 trillion ($412 billion) in 2020 from SAR570 billion ($152 billion) in 2015. PIF’s portfolio is diversified across a different set of investment pools including both domestic and international investment opportunities.
According to Moody’s PIF’s local investments are focused around maximizing the value of equity investments, investing in sector and real estate development as well as investments in giga-projects such as Neom. Those accounted for 67 per cent of the Fund’s assets under management as of December 2020 (excluding the treasury pool). On the
international front, the Fund has a diversified portfolio of listed and unlisted investments as well as International Strategic Investments which accounted for 33 per cent of assets under management as of December 2020 (excluding the treasury pool).
