Saudi Arabia’s government on Thursday filed papers to sell a new stake in state oil giant Aramco that could raise as much as $13.1 billion, a landmark deal to help fund the kingdom’s plan to diversify its economy.
In the main part of the deal, Saudi Arabia could raise $12 billion by offering about 1.545 billion Aramco shares, equivalent to about 0.64 per cent of the company, if it prices the sale at the top end of a 26.7 ($7.12) to 29 riyals range, according to Aramco’s filing on Riyadh’s Saudi Exchange.
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The deal’s value could rise to $13.1 billion at the top end under a so-called greenshoe option which would allow the sale of nearly 1.7 billion shares, or a 0.7 per cent stake. That option allows bankers to use shares to stabilise the price of the offering.
Investors have long anticipated the share sale as the energy giant has sought to widen its base while generating funds to turbocharge Saudi Arabia’s economic diversification programme.
“The offering provides us with an opportunity to broaden the shareholder base amongst both Saudi and international investors,” Aramco chief executive Amin Nasser told reporters on a call after the announcement.
“It also offers us an opportunity to increase liquidity and to increase our global index weighting.”
The offering is the culmination of a years-long effort to sell another chunk of one of the world’s most valuable companies following its record-setting IPO in 2019 raised $29.4 billion. About 10 per cent of the latest offering will be reserved for retail investors, subject to demand.
Sources told Reuters last week the offering could happen as soon as June.
The latest deal will allow the kingdom to finance large domestic projects tied to economic diversification, said Hasan Alhasan, senior fellow at the International Institute for Strategic Studies.
Having missed its target for foreign direct investment and with a budget deficit of up to $21 billion in sight, “the kingdom is resorting to the sale of equity in Aramco and to debt issuances,” he said.
“The kingdom is likely to continue redirecting capital to other sectors, including renewable energy, technology, tourism, logistics and manufacturing, which Riyadh hopes will constitute sources of long-term economic growth,” he added.
Aramco shares closed 0.17 per cent lower on Thursday at 29.1 riyals ($7.76), giving the company a market capitalisation of about $1.87 trillion. Its IPO price valued it at $1.7 trillion, but shares traded 10 per cent higher on their debut, roughly in line with its current valuation.
The company lifted dividends to almost $98 billion in 2023 from the $75 billion it had been paying annually, despite profit having dropped by nearly a quarter. It expects an outlay of $124.3 billion this year.
Aramco has also invested in refineries and petrochemical projects in China and elsewhere, expanded its retail and trading businesses, and sharpened its focus on gas, making its first foray into liquefied natural gas abroad last year.
Morgan Stanley, Citi, Goldman Sachs, HSBC, Saudi National Bank, Bank of America and JPMorgan are acting as joint global coordinators on the deal, with local banks Al Rajhi Capital, Riyad Capital, Saudi Fransi Capital acting as joint bookrunners.
There were roughly half the number of banks on the deal in comparison to Aramco’s IPO in 2019.