Saudi Arabia to sell shares worth $12 billion of oil major Aramco

By Matthew Martin and Anthony Di Paola

Saudi Arabia confirmed plans to sell shares in its giant oil company in a deal that could raise as much as 44.8 billion Saudi riyals ($12 billion) for the kingdom, as it seeks funds to pay for a massive economic transformation plan.
 

The sale of 1.545 billion shares in Saudi Aramco, or 0.64% of the company’s issued shares, will kick off June 2, according to a statement confirming an earlier report by Bloomberg News. The price range is expected to be between 26.70 and 29 Saudi riyals per share, representing as much as a 7.9% discount to the company’s closing share price on Thursday.

The deal will test global investors’ appetite for the world’s biggest oil exporter amid questions about climate change and the future of fossil fuels. The company’s massive dividend payouts will be an attraction for foreign investors, many of whom had balked at valuations of the mega initial public offer in 2019. But Aramco’s shares are expensive compared with other oil supermajors such as Exxon Mobil Corp. and Shell Plc.  

“This transaction provides an opportunity for current and new investors to build a sizable position in Saudi Aramco at a price where we believe the company offers attractive value and growth to our shareholders,” Aramco’s Chief Executive Officer Amin Nasser said.

Proceeds from the offering will help fund big initiatives to diversify the economy away from oil as Crown Prince Mohammed bin Salman pushes into artificial intelligence, sports, tourism and futuristic projects such as Neom. Crude oil prices are below the levels the government needs to balance its budget and the kingdom has lagged behind its target of attracting over $100 billion a year in foreign direct investment.

Saudi Arabia has already delayed some projects that are part of its economic transformation plan past 2030 and scaled back its ambitions for Neom. The economy has contracted for three quarters straight while the budget has been in deficit for six consecutive quarters. 

Against that backdrop, Aramco has maintained its $31 billion quarterly dividend — a boon to the Saudi government, which owns about 82% of the firm. The kingdom’s wealth fund holds a further 16% stake in the $1.9 trillion energy giant. The government will continue to be the main shareholder after the offering.

The deal comes shortly after Aramco’s stock dropped to the lowest level in over a year. Its start on Sunday will coincide with an OPEC+ gathering to discuss oil output policy, with most market-watchers expecting the group to maintain supply curbs. That would keep Saudi Arabia’s production near the lowest level in about three years.

The kingdom is leading efforts by the Organization of Petroleum Exporting Countries and its allies to restrict output in an attempt to revive the oil market and boost prices. The company already has large unused output capacity, and earlier this year was ordered by the government to halt a further expansion of its capability that freed up funds that can be redirected to the diversification efforts.

Global benchmark Brent was at about $82 a barrel on Thursday. Saudi Arabia needs oil near $100 to balance its budget, according to the International Monetary Fund. Prices are forecast to be about $79 in 2025 and $75 the following year, according to analyst estimates compiled by Bloomberg.

M. Klein & Co., whose founder Michael Klein is a veteran dealmaker known for his Saudi connections, and Moelis & Co. are independent financial advisers on the offering, according to the statement. Both firms worked on the IPO.

SNB Capital is lead manager of the share sale, according to the statement. It is also serving as a joint global coordinator along with Citigroup Inc., Goldman Sachs Group Inc., HSBC Holdings Plc, JPMorgan Chase & Co., Bank of America Corp. and Morgan Stanley.