Youssef Saba, Hadeel Al Sayegh and Maha El Dahan
DUBAI (Reuters) – Saudi Arabia’s sale of shares in oil giant Aramco (TADAWUL:) sparked more demand than shares offered within hours of trading opening on Sunday. It is a landmark deal that could raise up to $13.1 billion in a major test of the international appetite for the kingdom’s assets.
Banks involved in the deal will take institutional orders until Thursday and price the shares the next day, with trading expected to begin next Sunday on the Saudi Exchange in Riyadh.
The proposal would be a measure of Riyadh’s attractiveness to foreign investors and a key part of the kingdom’s ambitious plan to overhaul its economy. Foreign direct investment has repeatedly failed to achieve its goals.
The sale will also support the government’s efforts to end its “oil addiction,” as Saudi Arabia’s de facto ruler Crown Prince Mohammed bin Salman once called it, analysts and sources said.
The sovereign wealth fund, the Public Investment Fund (PIF), the vehicle of choice for the giant program that has invested tens of billions of dollars in everything from sports to futuristic desert cities, is likely to be the beneficiary of the funds, they say.
Aramco shares fell 2.6% on Sunday to 28.25 riyals ($7.53) as of 0825 GMT.
Saudi Arabia is offering investors about 1.545 billion Aramco shares, or 0.64%, priced between 26.7 and 29 riyals, or just under $12 billion at the top end of the range.
“The books are covered for the entire deal size within the price range,” meaning the specified demand exceeded the deal size, one of the banks involved in the deal said.
Banks could increase the supply by about $1 billion more. If all the shares are sold, the Saudi government would reduce its stake in the world’s largest oil exporter by 0.7%.
Leading global investment banks are helping manage the deal – Citi, Goldman Sachs, HSBC, JPMorgan, Bank of America and Morgan Stanley – along with local firms Saudi National Bank, Al Rajhi Capital, Riyad Capital and Saudi Fransi.
M. Klein and Company and Moelis (NYSE:) are serving as independent financial advisors to the transaction.
UBS Group’s Credit Suisse Saudi Arabia unit is also helping to find buyers for the shares, along with BNP Paribas (OTC:), Bank of China International and China International Capital Corporation, according to a stock exchange report on Sunday.
About 10% of the new supply will be reserved for retail investors depending on demand.
The deal comes as the OPEC+ oil producer group is set to meet on Sunday to set production policy, with some ministers meeting in Riyadh, according to OPEC+ sources.
The Organization of the Petroleum Exporting Countries, led de facto by Saudi Arabia, and its allies led by Russia, known together as OPEC+, are now cutting production by a total of 5.86 million barrels per day (bpd), which corresponds to approximately 5.7% of global demand.
However, Aramco, long a cash cow for the Saudi state, has increased its dividend by introducing a new performance-linked payout mechanism last year, despite falling profits as a result of lower volumes. Saudi Arabia produces about 9 million barrels of oil per day, about 75% of its maximum capacity.
The Saudi government directly owns just over 82% of Aramco. PIF owns 16–12% shares directly and 4% through its subsidiary Sanabil, with the rest held by public investors.
($1 = 3.7507 rials)