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State-owned oil giant Aramco is in talks to hire banks including HSBC, Goldman Sachs and Citigroup as it prepares to revive plans to sell shares in a secondary offering, Bloomberg reports, citing people it says are close to the transaction. It is also in talks with other unnamed banks as it looks to line up advisors for the offering, which might come in the upcoming few weeks, the sources said.
The secondary share sale is expected to raise some USD 20 bn in would be one of the world’s largest offerings in recent years — that’s USD10 bn more than earlier whispers about the offering had suggested.
What we still don’t know: There’s no final decision on the size of the stake that the government plans to sell or the timeline for the transaction. The list of advisors is still subject to changes and Aramco could always mothball the sale.
We expect proceeds from the sale to swell the Public Investment Fund’s coffers as officials look to continue investing at home amid a budget deficit occasioned lower oil prices.
Will investors have appetite for the sale? “Even in 2019 it was a tough sale in a world increasingly worried about ESG,” Bloomberg’s Saudi Arabia bureau chief, Mathew Martin, said in an interview (watch: runtime: 2:53) on the scoop. On the other hand, Aramco’s new cashflow scheme — which ensures higher dividends to shareholders — and investments into downstream and renewables could whet investor appetite, he added.
And remember: The bloom is off the rose when it comes to ESG. From Wall Street to boardrooms, the pendulum is shifting as corporate leaders and investors are now starting to “ talk more about maximizing returns than about saving the world,” with the Wall Street Journal going so far as to say that ESG is “the latest dirty word in corporate America.”
We expect that strong global appetite for Saudi story and cooling interest in ESG as an investment theme will see investors lining up to write tickets for the share sale.
BACKGROUND- The idea of selling more shares first surfaced in 2021, when Crown Prince and Prime Minister Mohammed bin Salman said the government would sell more shares in the oil giant, with proceeds earmarked for the Public Investment Fund. Aramco raised USD 29.4 bn on Tadawul in 2019 in what remains the biggest IPO in history.
The 2019 IPO in a nutshell: The world’s largest oil company floated a 1.5% stake for a top of the range price of SAR 32 a piece on Tadawul in December 2019, raising USD 25.6 bn before exercising its “greenshoe option” for an over-allotment of shares that earned the company USD 29.4 bn in total proceeds in January 2020. The transaction valued the company atUSD 1.87 tn, after selling a total of 3.45 bn shares.
IN CONTEXT- Aramco remains tightly held with only a small portion of the company trading freely. The government is currently majority shareholder and the only substantial shareholder of the oil giant with a 90.2% stake, while 1.5% is floated on the market and the remaining shares are held by non-substantial holders (those who own less than 5% each). Foreign shareholders have in their hands just 0.4% of the company’s shares.
