Reliance, Aramco call off $15 billion stake swap deal amid valuation differences

Reliance Industries and Saudi Aramco have called off the long hiccupping deal for Saudi Arabia’s oil giant to buy a stake in the oil-to-chemicals business of the Indian conglomerate due to valuation concerns. It is understood talks broke down over how much Reliance’s oil-to-chemicals (O2C) business should be valued as the world seeks to move away from fossil fuels and reduce emissions.

Instead, Reliance will now focus on signing multiple deals with companies to produce specialty chemicals for higher margins.

Aramco, the world’s top oil exporter, had signed a non-binding agreement to buy a 20% stake in Reliance’s O2C business for $15 billion in 2019. Last week, the companies announced they would re-evaluate the deal, ending two years of negotiations.

The collapse of the deal reflects the changing global energy landscape as oil and gas companies are veering away from fossil fuel to renewables. Valuations of refining and petrochemical assets have gone down especially after the recent COP26 climate talks in Glasgow.

Despite this, Reliance had stuck to the $75 billion valuation for the O2C business made in 2019, while Aramco wanted a 10% cut in valuation, it is learnt.  “Reliance has highlighted the difficulty of separating Jamnagar from the clean energy business as a reason to not complete the transaction, although we suspect business alignment and valuation were also key reasons,” Bernstein wrote in a recent note, referring to Reliance’s huge refining complex in Gujarat state.

It is learnt Reliance was seeking advice from Goldman Sachs while Citigroup was advising Aramco.

Without confirming whether the deal has been called off, Saudi Aramco said it has a longstanding relationship with Reliance and will continue to look for investment opportunities in India. Reliance said it would continue to be Saudi Aramco’s preferred partner for investments in the private sector in India and will collaborate with Saudi Aramco & SABIC for investments in Saudi Arabia. Reliance is the biggest Indian buyer of Saudi oil.

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