DUBAI - Saudi Arabia's sovereign wealth fund has selected Goldman Sachs to advise it on the sale of its stake in petrochemicals firm SABIC to Saudi Aramco, two sources familiar with the process told Reuters on Monday.
Citigroup Inc, which along with Goldman declined to comment, has won the mandate to advise Saudi Basic Industries Corp (SABIC) on the deal, the sources said.
State-owned oil company Aramco plans to buy a controlling stake in SABIC, possibly taking the Public Investment Fund's (PIF) entire 70 percent holding.
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.
Investment banking fees in Saudi Arabia are modest compared to elsewhere, while risks are high, making the SABIC deal an especially coveted prize. Riyadh recently shelved plans to float Aramco and has postponed an airport privatisation on which Goldman was advising.
Goldman began operating in Riyadh in 2009 and obtained new licenses in 2014 and 2017 that have allowed it to expand. It bought a portion of Aramco's $10 billion credit facility last year in an attempt to secure a role in the IPO.
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 Aramco acquires the full SABIC stake, valued at around $70 billion, it will be the kingdom's biggest M&A deal and provide a boost to the oil major's downstream business. Reuters has previously reported that JPMorgan and Morgan Stanley are advising Aramco on the deal.
SABIC has recently boosted its own holdings, buying a 25 percent stake in Swiss specialty chemical maker Clariant in January. That deal initially faced regulatory delays, but has now been cleared to proceed.
The deal will also provide an alternative source of cash to the PIF, after an initial public offering of Aramco that was supposed to raise $100 billion was shelved.
Analysts estimate the PIF has around $250 billion worth of assets under management. It said last year that it aims to increase its financial clout to around $400 billion.
It already owns stakes in many companies across the kingdom and plans to beef up its overseas expansion, including pledges of $20 billion to a fund with U.S. private equity firm Blackstone and $45 billion 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.