SABIC's Gas Division IPO: A Strategic Pivot to Unlock Value Amid Saudi's Industrial Ambitions

The Saudi Basic Industries Corporation (SABIC) is exploring a potential IPO of its subsidiary National Industrial Gases Co. (GAS), a move that could mark a pivotal shift in its portfolio strategy. With GAS reporting a robust SAR 415.8 million net profit in 2024—up from SAR 1.6 billion in revenue the prior year—the decision to pursue an IPO signals SABIC's focus on capitalizing on Saudi Arabia's industrial growth while optimizing its core holdings. This strategic realignment not only aligns with the kingdom's Vision 2030 diversification goals but also offers investors a chance to bet on a sector critical to energy, manufacturing, and petrochemicals.

Strategic Portfolio Optimization: Shedding Non-Core Assets, Boosting Liquidity

SABIC, a cornerstone of Saudi's petrochemicals industry, has faced cyclical volatility in its core businesses. Its 2024 net profit rebound to SAR 1.5 billion (from a SAR 2.8 billion loss in 2023) highlights recovery efforts, but first-quarter 2025 losses of SAR 1.2 billion underscore the need for strategic pivots. By floating GAS—a 74%-owned subsidiary—SABIC aims to shed non-core assets, redeploy capital toward high-margin ventures, and reduce operational complexity. This move mirrors broader trends among global industrial conglomerates, such as Siemens's spin-off of Siemens Energy, where simplification drives focus and value.

The involvement of top-tier advisors—Lazard, HSBC, JPMorgan, and Morgan Stanley—suggests SABIC is positioning the IPO to attract institutional and retail investors. A successful listing could raise billions for SABIC, while GAS gains autonomy to pursue growth in Saudi's expanding industrial sector.

Financial Implications: Value Unlock and Risks

GAS's 2024 net profit of SAR 415.8 million, combined with its steady revenue trajectory, positions it as a stable asset. However, risks persist. Market conditions are uncertain: Saudi's stock market has fluctuated amid global economic headwinds, and recent SABIC losses may deter investor appetite. Regulatory hurdles, including valuation negotiations and compliance with Tadawul (Saudi's stock exchange) listing rules, could delay the IPO timeline.

Yet the upside is compelling. Industrial gases are indispensable to Saudi's Vision 2030, powering sectors from steel production to healthcare. With SABIC's existing partnerships and GAS's established infrastructure, the subsidiary is well-positioned to capitalize on projects like the Fujian Petrochemical Complex and Saudi's expanding petrochemical hubs.

Growth Prospects: Riding Saudi's Industrial Wave

GAS operates in a sector with strong tailwinds. Saudi Arabia's push to diversify its economy—projected to grow at 3.4% in 2025—relies heavily on industrial expansion. The kingdom's National Industrial Development and Logistics Programme (NIDLP) aims to boost manufacturing's GDP contribution to 12% by 2030, creating demand for oxygen, nitrogen, and specialty gases.

GAS's 2024 financials reflect this potential: a SAR 15 million gross profit jump, coupled with higher investment income from dividends, signals operational efficiency. Meanwhile, SABIC's 5% year-on-year improvement in its Net Promoter Score suggests stronger customer loyalty, which could indirectly benefit GAS through cross-selling opportunities.

Investment Thesis: A Rare Entry Point for Saudi's Industrial Future

The IPO presents a rare opportunity for investors to access a key player in Saudi's industrial backbone. For SABIC shareholders, a partial exit from GAS could unlock trapped value, potentially boosting parent company valuations. Meanwhile, GAS's standalone listing might attract thematic investors focused on infrastructure and energy transition.

Recommendation:
- Proactive Engagement: Monitor the IPO timeline closely. Given GAS's profitability and strategic importance, the offering could be oversubscribed. Investors with access to Saudi's markets should consider participating.
- SABIC's Stake Retention: Even if GAS lists, SABIC's 74% ownership (post-IPO) will likely remain a stabilizing factor. Holders of SABIC shares might see upside if the IPO reduces debt and reinvests proceeds into high-growth areas.
- Risk Mitigation: Diversify exposure by pairing GAS shares with broader industrial ETFs or companies in Saudi's logistics and energy sectors.

Final Analysis

SABIC's potential IPO of GAS is more than a capital-raising exercise—it's a strategic recalibration to focus on core strengths while monetizing a profitable asset. With Saudi's industrial sector set to boom and GAS's financials demonstrating resilience, this move could be a win-win for SABIC and investors. The risks are real, but the alignment with national economic priorities and GAS's operational health make this IPO a compelling play on Saudi's industrial renaissance.

Stay tuned for valuation details and regulatory updates—the stakes are high, and the rewards could be transformative.