Saudi Aramco’s $12 billion share sale closed shortly after trading opened Sunday, a boon for the government as it seeks funds to help finance a plan of massive economic transformation.
The government obtained a request for all proposed actions within hours of opening the books, according to terms of the agreement seen by Bloomberg News. The books were sold in a price range of 26.70 riyals to 29 riyals.
Although it was not immediately clear how much of the demand came from abroad, the order book reflected a mix of local and foreign investors, three people familiar with the matter said, declining to be identified because the information is private.
The scale of foreign ownership will be closely monitored as an indicator of interest in Saudi assets. When Aramco went public in 2019, foreign investors largely balked at valuation expectations and left the government dependent on local buyers. The listing, worth $29.4 billion, attracted orders worth $106 billion, and about 23% of the shares were allocated to foreign buyers.
One of the biggest selling points of the latest offering is the chance to collect one of the biggest dividends in the world. Investors willing to overlook a high valuation and lack of buybacks could bank a $124 billion annual payout that Bloomberg Intelligence estimates would give the company a dividend yield of 6.6%.
The government started the business the same day OPEC+ met to discuss oil production policy. The group has agreed to extend its production cuts until 2025, while liquidation some of these borders from later this year. This would allow Saudi Arabia to ease production restrictions on Aramco.
Aramco shares fell 1.9% on Sunday, valuing the company at around $1.8 trillion. The stock has fallen about 14% since the beginning of this year, when Bloomberg News first reported the government’s intention to shed a stake, and is currently trading at its lowest levels in over a year.
The Saudi government owns about 82% of Aramco, while the kingdom’s heritage fund owns another 16%. The kingdom will remain the largest shareholder after the offer, which has been in the works for years.
Crown Prince Mohammed bin Salman said in 2021 that the government would consider selling more Aramco shares in the future. These plans gained momentum a year ago, when the kingdom began working with advisers to study the feasibility of a complementary offer.
The agreement is among the biggest share sales in the world since the listing of Aramco. Profits will help fund initiatives to diversify the economy as the kingdom moves into artificial intelligence, sports, tourism and projects such as Neom.
The offer adds to Saudi Arabia’s efforts to raise cash to cover its budget deficit. International debt sales this year brought in $17 billion, more than any other emerging-market sovereign, according to data compiled by Bloomberg. The government also sold $25.5 billion worth of riyal notes domestically, compared to just under $20 billion in the same period a year ago.
The deal coincides with a period of strong demand for new stock sales in Saudi Arabia. In recent weeks, four companies have drawn a a total of $176 billion in orders for their IPOs, with fund managers flocking to deals offering near-guaranteed returns over the past two years.
The government is working with a number of banks on this sale. M. Klein & Co. is an independent financial advisor alongside Moelis & Co.
SNB Capital acts as lead manager. It is also a joint global coordinator with Citi Group Inc., Goldman Sachs Group Inc., HSBC Holdings PLC, JPMorgan Chase & Co., Bank of America Corp. And Morgan Stanley. Al Rajhi Capital, BOC International, BNP Paribas SA, China International Capital Corp., EFG Hermes, Riyad Capital, Saudi Fransi Capital and UBS are the bookrunners of the transaction.
Some of these banks also participated in the Aramco IPO, when they were paid just over $100 million for their work. These relatively low fees are common in the area. In comparison, banks like Goldman and JPMorgan have spent around $60 million to help Interactive platoon Inc. only raised $1.2 billion in 2019.
The government has not yet said how much banks will get from the latest deal. Instead, the prospectus says the kingdom will pay a fee to the bookrunners based on the total value of the offering as well as expenses related to the sale of the shares.
In total, Saudi Arabia plans to sell 1.545 billion shares, representing a 0.64% stake. The government could raise an additional $1.2 billion if it exercises an option to sell more shares in the offering.
