Saudi Aramco has agreed to pay $69.1 billion for a majority stake in petrochemicals group Saudi Basic Industries Corp. (SABIC) in a deal critical to financing Prince Mohammed bin Salman’s grandiose development plans.

The transaction—in which the sovereign Public Investment Fund (PIF) is selling its 70% stake in SABIC—provides a much-needed cash boost to Prince Mohammed’s plan to diversify Saudi Arabia’s oil-dependent economy.

The PIF, chaired by Prince Mohammed, is seeking to transform the local economy while investing tens of billions of dollars in eye-catching investments such as Uber and Tesla.

The deal was first mooted last year when it became clear that the kingdom had to shelve its plans to list Aramco as investors balked at the $2 trillion valuation. That initial public offering was designed to raise as much as $100 billion, which would have been injected into the PIF.

Riyadh’s handling of what is in effect a state-directed merger of Saudi Arabia’s two biggest and most internationally-exposed companies has raised corporate governance concerns at a time when the country is trying to attract foreign investors to its domestic market.

“There was a fear that Aramco could force a price that was below the market value. That will not happen, which is good news,” said one person involved in the negotiations.

However, Aramco is not paying any premium for the stake. In almost all acquisitions where control of a company changes hands, the acquirer pays a premium of anywhere between 20% and 40% to the market price on average.

Saudi Aramco had been arguing that PIF’s stake in SABIC, which has a market value of $99.3 billion, was overvalued because global funds have inflated stock prices ahead of the kingdom’s inclusion on emerging market indices this year.

The transaction—in which funds are being transferred from state-owned Aramco into the PIF—is “moving money from one pocket to another”, which is why no premium is being paid, said one person involved in the deal.

Largely overshadowed by Aramco’s presence on the international stage, SABIC is also a major global industrial company: it boasted revenues of $45 billion and net income of $5.7 billion from operations in more than 50 countries last year.

Finalising the SABIC acquisition paves the way for Saudi Aramco to tap global bond markets, which bankers hope will provide their payday on the transaction.

The SABIC stake sale should provide a steady stream of funds for the PIF at a time when finance ministry handouts have subsided, big-ticket investments have yet to yield adequate returns and as the country faces a low-growth outlook.

Government officials have said they are now targeting a 2021 Aramco flotation, with advisers arguing that the investment case in Aramco will be strengthened through the acquisition of SABIC.

Yasir al-Rumayyan, PIF’s managing director, described the deal as a “win-win-win” for three of Saudi Arabia’s most important economic entities that are party to the transaction.

“It will unlock significant capital for PIF’s continued long-term investment strategy, underpinning sectoral and revenue diversification for Saudi Arabia,” he said in a statement. Saudi Aramco as a strategic owner would add considerable value, he added, while SABIC’s capabilities would unlock growth opportunities for the kingdom’s oil company.

RELATED: Middle East ‘Big Oil’ To Boost Global Petrochemicals Footprint

Saudi Aramco had been arguing that it was not willing to pay the full $70 billion, with CEO Amin Nasser telling the Financial Times the energy giant was only willing to buy the SABIC stake “at the right price.”

In recent months, Aramco executives have struggled to understand how to integrate SABIC into its operations, while other potential deals have been put on hold, two people familiar with the matter said.

In the deal announcement, Saudi Aramco said the deal was in line with its long-term strategy to enhance its downstream portfolio by increasing refining capacity from 4.9 million barrels a day (bbl/d) to 8 million and 10 million bbl/d by 2030, of which 2 million to 3 million bbl/d will be converted into petrochemical products.

Goldman Sachs, Bank of America and M. Klein and Co. advised the PIF; Citigroup and HSBC advised SABIC; JPMorgan and Morgan Stanley advised Aramco, according to people involved with the deal.