Saudi Arabia transfers 4% of Aramco shares to sovereign wealth fund

The move is part of the kingdom's economic overhaul plans which include shoring up the assets of the Public Investment Fund

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Saudi Arabia's Crown Prince Mohammad bin Salman said 4 per cent of oil giant Saudi Aramco's shares have been transferred to country's sovereign wealth fund, known as the Public Investment Fund, to support restructuring the economy.

The move is also part of PIF's plan to raise its assets under management to 4 trillion Saudi riyals ($1.07tn) by 2025, according to the state-run Saudi Press Agency (SPA).

The state remains the largest shareholder in Saudi Aramco after the transfer as it still owns more than 94 per cent of the company's shares, SPA said, citing the crown prince who is also chairman of the sovereign wealth fund.

The 4 per cent stake would be worth nearly $80 billion, based on Saudi Aramco's market capitalisation.

The transfer of of Saudi Aramco's shares into the fund, which currently has about $480bn in assets under management, will help bolster the fund's strong financial position and its high credit rating in the medium term, according to the statement.

Last week, Moody's Investors Service assigned its fifth-highest investment grade rating to the sovereign wealth fund in its first rating of the government-owned entity. The agency assigned the fund an A1 long-term issuer rating, an A1 baseline credit assessment (BCA) and a "stable" outlook on all ratings.

The deal is a "private transfer between the state and PIF" and Saudi Aramco "is not a party to the transfer and did not enter into any agreements or pay or receive any proceeds from the transfer," the company said in a statement to the Tadawul stock exchange.

The transaction will not affect the company’s total number of issued shares, Aramco said.

The share transfer does not have an impact on the company’s operations, strategy, dividends distribution policy or governance framework, it said.

Saudi Aramco, the biggest oil company globally, completed the world's largest initial public offering in 2019, raising $25.6bn, and later sold more shares boosting the total to $29.4bn.

Yasir al-Rumayyan, governor of PIF and chairman of Aramco, said last year that the company may consider selling more shares if the market conditions are right.

The sovereign wealth fund is a central plank of Saudi Arabia's Vision 2030 plan that seeks to diversify the Arab world's largest economy and reduce its reliance on oil. Under a five-year strategy that was announced in January of last year, the fund aims to more than double the value of its assets under management to $1.07tn, commit $40bn annually to develop the domestic economy until 2025 and help create 1.8 million jobs. It will contribute $320bn to the kingdom's non-oil economy.

The fund created 10 new sectors, launched more than 30 new companies, created 331,000 jobs in Saudi Arabia, and tripled assets under management over the past four years. Under its five-year strategy, the fund is focusing on 13 sectors as part of its core domestic strategy.

These include health care, renewables, telecoms, media and technology, food and agriculture, automotive, transportation and logistics, real estate, aerospace and defence, construction and building components and services. The kingdom will also continue to develop entertainment, leisure and sports, financial services, metals and mining, and the retail sector.

Some of the companies established by the fund include the futuristic city known as Neom, the Red Sea Development Company, Qiddiya, the KAFD Development and Management company, SAMI, the Saudi Jordanian Investment Fund, Jeddah New Downtown Company, Saudi Entertainment Venture, Saudi Information Technology Company and National Energy Services.

The fund nearly tripled its holdings of US stocks to more than $43bn in the third quarter of last year, investing in a variety of companies from e-commerce and FinTech to biotechnology and fuel cell-powered commercial vehicles.

The Public Investment Fund increased its investments in US equities from about $15.94bn in the second quarter of last year. Its US investments include electric car company Lucid, which went public last July and in which the fund has a 63 per cent stake.

It also has stakes in Uber, image sharing and social media company Pinterest, FinTech company PayPal, as well as in Visa, the world's second-largest card payment company, and in Chinese e-commerce company Alibaba, among others.

Updated: February 14, 2022, 6:20 AM