Saudi Industrial eyes Petrochem merger
Riyadh, April 14, 2011
Saudi Industrial Investment Group (SIIG) plans to merge with its unit National Petrochemical Co (Petrochem) and will build a $1.2 billion petrochem complex in 2012, its top executive said.
SIIG currently owns 50 percent of Petrochem and produces around 1.3 million tonnes of petrochemical products.
A potential merger, expected to be completed within nine months, will create the third largest petrochemical firm in Saudi Arabia after Saudi Basic Industries (Sabic) and Saudi Kayan Petrochemical Co.
'It does not make sense for us to have too many companies so we just want to collapse the two into one....we are in the process of soliciting offers now from banks then we will discuss and nominate consultants,' said SIIG's managing director Suleiman al-Mandeel.
'I'll give it six to nine months, if everybody agrees, the shareholders and the capital market authority,' he said.
Saudi Industrial has a market value of around $3 billion and Petrochem is valued at $2.9 billion, according to Reuters data.
Sabic, with a market value of about $86 billion, is the world's largest petrochemical company based on market capitalisation.
SIIG expects its production to rise to 6 million tonnes after Petrochem's $5.4 billion joint-venture with Chevron Phillips, called Saudi Polymers, starts production in the fourth quarter, Al-Mandeel said.
Chevron Phillips is a joint venture with US-based energy firms Chevron and ConocoPhillips. 'It (project) should be operational in the fourth quarter.
It has been under construction for four years now,' he said.
The executive also said SIIG is looking to set up another $1.2 billion complex with Chevron Philips that will work on conversion projects, using the company's own products to downstream and produce products such as nylon and its derivatives.
'By next year we should be constructing a complex... about $1.2 billion,' he said.
The new project will be a 50/50 joint venture with Chevron Philips and is currently in the detailed engineering stage, he said.
Al-Mandeel also said the Saudi-based petrochemical firm is expected to post at least a 30 percent rise in its profits for 2011 as petrochemical prices continue to rise.
'In 2008 prices skyrocketed then there was a big drop... I think it will recover,' he said, adding that the firm would see a bigger rise in profit for 2011.
'I would say at least 30 percent,' when asked about the firm's profit rise expectation for 2011. SIIG posted a net profit of 404.6 million riyals for ($107.9 million) 2010.