Saudi Arabia's sale of shares in oil giant Aramco drew more demand than the stock on offer within hours of kicking off on Sunday, a deal that could raise up to $13.1 billion in a major test of international appetite for the kingdom's assets.
The banks on the deal will take institutional orders through
Thursday and will price the shares the following day, with trading expected to
start next Sunday on Riyadh's Saudi Exchange.
The offering will be a gauge of Riyadh’s appeal to foreign
investors, a key plank of the kingdom’s plan to overhaul its economy. Foreign
direct investment has repeatedly missed its targets.
The sale also points to efforts by the government to wean
itself off its “oil addiction”, as Saudi de facto ruler Crown Prince Mohammed
bin Salman once called it.
The sovereign wealth fund, the Public Investment Fund (PIF),
the preferred vehicle driving the mammoth agenda that has poured tens of
billions of dollars into everything from sports to futuristic desert cities, is
likely to be a beneficiary of the funds, analysts and sources have said.
Aramco’s shares closed about 2% lower on Sunday at 28.45
riyals ($7.53).
Saudi Arabia is offering investors about 1.545 billion
Aramco shares, or 0.64%, at 26.7 to 29 riyals, or just under $12 billion at the
top end of the range.
Books are covered on the full deal size within the price
range,” meaning indicated demand exceeded the deal size, one of the banks on
the deal said in an update to investors reviewed by Reuters.
The banks can increase the offering by a further roughly $1
billion. If all the shares are sold, the Saudi government will be cutting its
stake in the world’s top oil exporter by 0.7%.
The world’s top investment banks are helping to manage the
sale – 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 are independent financial
advisers for the deal.
UBS Group’s Credit Suisse Saudi Arabia unit alongside BNP
Paribas, Bank of China International and China International Capital
Corporation are also helping to seek buyers for the shares, according to a
stock exchange filing on Sunday.
About 10% of the new offering will be reserved for retail
investors, subject to demand.
The deal kicked off on the same day the OPEC+ group of oil
producers met, agreeing to extend most of its deep oil output cuts well into
2025, as the group seeks to shore up the market amid tepid global demand
growth, high interest rates and rising rival U.S. production. Some OPEC+
ministers met in Riyadh, while others joined meetings online.
The de facto Saudi-led Organization of the Petroleum
Exporting Countries and allies led by Russia, together known as OPEC+, had been
cutting output by a total of 5.86 million barrels per day (mbpd), equal to
about 5.7% of global demand.
Still, Aramco – long a cash cow for the Saudi state – has
boosted its dividends, introducing a new performance-linked payout mechanism
last year, despite lower profits as a result of the lower volumes. Saudi Arabia
is producing about 9 mbpd of crude, roughly 75% of its maximum capacity.
The Saudi government directly holds just over 82% of Aramco.
PIF owns 16% - 12% directly and 4% through subsidiary Sanabil, with the
remainder held by public investors.