Saudi Arabia put a preliminary valuation on its state-owned oil giant Aramco of between $1.6 trillion and $1.71 trillion, short of the $2 trillion target set by Crown Prince Mohammed bin Salman in 2016.
Aramco will mainly rely on local demand -- one third of the offering is reserved for Saudi retail investors -- and it pulled plans to market the deal in the US There was also no mention of cornerstone investors in the updated prospectus.
The company is seeking to raise between $24 billion and $25.6 billion by selling a 1.5% stake, putting it close to Alibaba Group Holding Ltd.’s $25 billion deal -- currently the world’s largest IPO.
- Price range: 30 riyals ($8) to 32 riyals per share
- Aramco will publish the final price and valuation on Dec. 5
- Listing date for Aramco shares still to be announced
- Won’t make offer in the US, Australia, Canada, Japan
Saudi Arabia has been pulling out all the stops to ensure the IPO is a success to a skeptical audience. It’s cut the tax rate for Aramco, promised a hefty dividend and negotiated commitments from its wealthiest families as many international investors seem ready to pass at the valuation set by Aramco.
A poll of 24 money managers by Bloomberg News shows more than 40% put the company’s fair range at $1.2 trillion to $1.5 trillion.
“We expect a decent cover in the range of two-to-three times over-subscription for this size,” said Aarthi Chandrasekaran, a portfolio manager in Abu Dhabi at Shuaa Capital. “From a retail perspective, assured bonus shares and fixed dividend will support the stock price in the secondary market, not to forget the passive funds flow that follows in few weeks after the listing.”
Speaking at the kickoff of the investor roadshow on Sunday, Chief Executive Officer Amin Nasser called it “a historic day” for Aramco and the kingdom. “We couldn’t be happier,” he said.
As well as excitement among Saudi nationals, the kingdom’s richest families are being pressed to commit large sums to the deal. Among those considering sizable purchases are the Olayan family and Prince Alwaleed bin Talal, the billionaire investor who was held for several weeks in Riyadh’s Ritz-Carlton Hotel during the 2017 crackdown on corruption.
China, the world’s largest oil importer, may commit as much as $10 billion through sovereign wealth funds and other state-owned enterprises, according to people familiar with the situation.
Proceeds will be transferred to the sovereign wealth fund, which has been making a number of bold investments, plowing $45 billion into SoftBank Corp.’s Vision Fund, taking a $3.5 billion stake in Uber Technologies Inc. and planning a $500 billion futuristic city.
- Institutional book-building period: Nov. 17-Dec. 4
- Retail subscription period: Nov. 17-Nov. 28
- Refund of excess subscription amount to individual investors: Dec. 12
- Aramco earned net income of $68.2 billion in the first nine months compared with $83.1 billion a year ago. Revenue slipped to $217 billion from $233 billion.
©2019 Bloomberg L.P.