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By Yousef Saba, Hadeel Al Sayegh and Maha El Dahan
DUBAI (Reuters) – Saudi Arabia’s sale of shares in oil giant Aramco (Tadawul): attracted more demand than the stock was on offer within hours of its launch on Sunday, a historic deal that could raise up to $13.1 billion in a major test of the international market. Appetite for the Kingdom’s assets.
The banks participating in the deal will receive institutional orders until Thursday and will price the shares the next day, and trading is expected to begin next Sunday on the Saudi Stock Exchange in Riyadh.
The offering will be a measure of Riyadh’s attractiveness to foreign investors, and is a key element of the kingdom’s ambitious plan to reform its economy. Foreign direct investment has repeatedly missed its mark.
Analysts and sources said the sale would also boost the government’s efforts to break its “oil addiction,” as Saudi Crown Prince Mohammed bin Salman once described it.
They said the sovereign wealth fund, the Public Investment Fund, the preferred vehicle driving the mega-agenda that has pumped tens of billions of dollars into everything from sports to futuristic desert cities, would likely be the beneficiary of the money.
Aramco shares fell 2.6 percent on Sunday to 28.25 riyals ($7.53) by 0825 GMT.
Saudi Arabia is offering investors about 1.545 billion Aramco shares, or the equivalent of 0.64 percent, at a price ranging from 26.7 to 29 riyals, or just under $12 billion at the maximum end of the range.
One of the banks involved in the deal said: “The books are covered by the full size of the deal within the price range,” meaning that the indicated order exceeded the deal size.
The banks could increase the supply by nearly another billion dollars. If all shares are sold, the Saudi government will reduce its stake in the world’s largest oil exporter by 0.7%.
The world’s largest investment banks are helping to manage the sale – Citi, Goldman Sachs, HSBC, JPMorgan, Bank of America and Morgan Stanley – along with local firms National Bank of Saudi Arabia, Al Rajhi Capital, Riyad Capital and Saudi Fransi.
M. Klein and Company and Moelis (NYSE:) are independent financial advisors to the transaction.
UBS Group’s Saudi unit, Credit Suisse, along with BNP Paribas (OTC:), China International Bank and China International Capital Corporation, are helping to search for buyers for the shares, according to a stock exchange filing on Sunday.
About 10% of the new offering will be allocated to individual investors, depending on demand.
The agreement begins as the OPEC+ group of oil producers is scheduled to meet on Sunday to decide production policy, with some ministers meeting in Riyadh, according to OPEC+ sources.
The Saudi-led Organization of the Petroleum Exporting Countries and its Russia-led allies, known together as OPEC+, are currently cutting production by a total of 5.86 million barrels per day, equivalent to about 5.7% of global demand.
However, Aramco – long a cash cow for the Saudi state – boosted its profits, introducing a new performance-linked distribution mechanism last year, despite lower profits as a result of lower volumes. Saudi Arabia produces about 9 million barrels per day of crude oil, roughly 75% of its maximum capacity.
The Saudi government directly owns just over 82% of Aramco. The Public Investment Fund owns 16% – 12% directly and 4% through its subsidiary Sanabel, and the rest is owned by public sector investors.
($1 = 3.7507 riyals)
