Saudi Arabia is set to hire banks including Citigroup Inc., Goldman Sachs Group Inc. and HSBC Holdings Plc for a secondary share sale in Aramco, a deal that would raise about $20 billion and rank among the biggest offerings in recent years, people familiar with the matter said.
The world’s biggest oil exporter is also in talks with other banks as it pulls together a roster of advisers for the offer that may come in the next few weeks, the people said, asking not to be identified because the information is private.
The lineup of advisers may still change, the people said. There’s no final decision on the timing of the sale or the number of shares the government will sell, and the offering could yet be delayed, they said.
Aramco, Citigroup, Goldman and HSBC declined to comment.
Some of these Wall Street banks also worked on Aramco’s initial public offering in 2019, when they were paid minuscule fees by global standards. They’re now coming back to work on the follow-on offer, which may also help them get other business in the kingdom as Crown Prince Mohammed bin Salman pushes ahead with an ambitious plan to diversify the economy.
The challenge for any new Aramco share sale would be attracting new investors. Many international firms had balked at the Saudi government’s valuation expectations and Aramco’s low yield compared with industry peers during the IPO. That left the deal mostly relying on local retail investors and wealthy family offices.
Although the company, with a $2 trillion market value, has introduced a new mechanism to boost dividends in an attempt to attract more investors and improve liquidity, it still lags peers. Aramco’s price-to-earnings ratio tops that of Shell Plc, BP Plc and Exxon Mobil Corp., according to data compiled by Bloomberg.
Still, many of the world’s top asset managers have invested in Aramco, in part because of its weighting in the Saudi stock index.
Low Fees
Aramco raised about $30 billion in the world’s largest IPO, paying out just over $100 million in fees. In comparison, banks including Goldman and JPMorgan Chase & Co. split about $60 million from helping Peloton Interactive Inc. raise $1.2 billion in 2019. Chinese internet giant Alibaba Group Holding Ltd., which raised $25 billion in its 2014 IPO, paid about $300 million to its underwriters including performance fees.
Advisers working on Aramco’s latest offer will likely have to contend with similarly low fees that are common in the region.
Aramco, in which the Saudi government owns a 90% stake, last month surprised the market by abandoning plans to boost its oil production capacity. It was a dramatic u-turn that will raise questions about the company’s views on demand for its oil but also free up billions of dollars of spending that can be used elsewhere.
MBS, as the crown prince in known, had said in January 2021 that the government would look to sell more shares in Aramco, with proceeds transferred to the kingdom’s sovereign wealth fund. Those plans had been gaining momentum last year, Bloomberg reported in May.
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