Saudi Fund Said to Explore Asset Sales for Overseas Deals

(Bloomberg) -- Saudi Arabia’s sovereign wealth fund is considering selling stakes in local companies to raise funds for international expansion, according to five people with knowledge of the matter.

The Public Investment Fund -- with about $100 billion worth of shares in listed local companies including Saudi Basic Industries Corp. and Saudi Telecom Co. -- is reviewing the stakes as it seeks to diversify its assets, the people said, asking not to be identified as the discussions are private. The fund could reduce its holdings in local companies and retain control through measures such as golden shares, one of the people said.

Saudi Arabia is planning to expand its sovereign wealth fund into the world’s largest by transferring ownership of Saudi Aramco to the PIF and also the proceeds from the oil company’s initial public offering. The fund could eventually control more than $2 trillion, according to Deputy Crown Prince Mohammed bin Salman, and plans to increase the proportion of its foreign investments to 50 percent by 2020, up from 5 percent now.

Saudi Arabian stocks were poised for the biggest drop since January on concern that the PIF may reduce its position in local companies. The Tadawul All Share Index lost 4.1 percent as of 2:07 p.m. in Riyadh, as more than 90 percent of its members retreated, with Saudi Telecom Co. and National Commercial Bank down by more than 3 percent. PIF owns 70 percent and 44 percent respectively of those companies.

The PIF didn’t immediately return calls seeking comment.

Foreign Investment

Overseas investing has so far been limited. The PIF in October said it is partnering with SoftBank Group Corp. to form a new fund to invest as much as $100 billion in the global technology industry in the next five years. Earlier this year it made its highest-profile international deal to date when it invested $3.5 billion in in U.S. ride-share company Uber Technologies Inc. PIF managing director Yasir Alrumayyan will take a board seat at the San Francisco-based company. In July 2015, it took a 38 percent stake in Korea’s Posco Engineering & Construction Co. for $1.1 billion.

Ahead of the possible assets sales, the PIF is also seeking to take on a more active role in the companies where it holds stakes, according to two of the people. It will be more involved in picking senior management and setting strategy, moving from its role as a more passive investor, the people said.

The PIF was set up in 1971 to support projects of strategic significance for the development of Saudi Arabia’s national economy. It is working with U.S.-based executive search firm Korn Ferry International to recruit senior bankers for positions including head of private equity, head of real estate, head of risk management and the head of markets, people with knowledge of the matter said earlier this year.

To contact the reporters on this story: Stefania Bianchi in Dubai at sbianchi10@bloomberg.net, Matthew Martin in Dubai at mmartin128@bloomberg.net, Dinesh Nair in London at dnair5@bloomberg.net. To contact the editors responsible for this story: Dale Crofts at dcrofts@bloomberg.net, Cindy Roberts, Ross Larsen