Saudi Arabia’s government recently filed papers to sell a new stake in state oil giant Aramco in a historic deal that could raise up to $13.1 billion. The main part of the deal involves offering about 1.545 billion Aramco shares, equivalent to 0.64% of the company, potentially raising $12 billion if priced at the top end of a 26.7 to 29 riyals range. An additional greenshoe option could increase the deal’s value to $13.1 billion, allowing the sale of nearly 1.7 billion shares, or a 0.7% stake, to stabilize the offering price.
The share sale is highly anticipated by investors as Aramco aims to diversify its shareholder base while generating funds to support Saudi Arabia’s economic diversification plan. Aramco’s CEO, Amin Nasser, highlighted the offering as an opportunity to broaden the shareholder base among Saudi and international investors, increase liquidity, and enhance the company’s global index weighting. The issuance marks the culmination of a years-long effort to sell equity in one of the world’s most valuable companies following its record-breaking IPO in 2019.
The deal is expected to pave the way for financing large domestic projects aligned with Saudi Arabia’s economic diversification agenda. Hasan Alhasan, a senior fellow at the International Institute for Strategic Studies, noted that the kingdom is turning to equity sales in Aramco and debt issuances to address its budget deficit and redirect capital to sectors like renewable energy, technology, tourism, logistics, and manufacturing. This strategic shift aims to nurture long-term economic growth and offset potential shortfalls in foreign direct investment.
Aramco’s shares closed slightly lower at 29.1 riyals ($7.76) on Thursday, resulting in a market capitalization of approximately $1.87 trillion. Despite a drop in profit, the company increased dividends to nearly $98 billion in 2023 and expects a substantial outlay of $124.3 billion this year. Aramco has also expanded its operations globally, investing in refineries, petrochemical projects, retail, and trading businesses, and venturing into the liquefied natural gas market.
Leading financial institutions like Morgan Stanley, Citi, Goldman Sachs, HSBC, Saudi National Bank, Bank of America, and JPMorgan are serving as joint global coordinators for the deal, with local banks acting as joint bookrunners. Compared to Aramco’s IPO in 2019, the latest stake sale involves half the number of banks, indicating a streamlined and efficient process. Overall, the offering signifies a significant milestone in Saudi Arabia’s economic transformation and signals a strategic shift towards sustainable growth and investment diversification.
