Saudi Arabia Is in Talks to Add Top Wall Street Banks to Aramco Share Sale

Saudi Arabia Is in Talks to Add Top Wall Street Banks to Aramco Share Sale

Saudi Arabia is in talks to add top Wall Street banks for a secondary share sale in oil giant Aramco, as it pushes ahead with one of the largest stock offerings in recent years, people with knowledge of the matter said.

The kingdom plans to hire JPMorgan Chase & Co. as one of the main underwriters to the offering, the people said, asking not to be identified as the matter is private. Bank of America Corp. and Morgan Stanley are also contending for lead roles on the deal, which could raise as much as $20 billion, according to the people.

It has already lined up Citigroup Inc., Goldman Sachs Group Inc. and HSBC Holdings Plc to work on the offering, Bloomberg News reported last month. Boutique bank Moelis & Co. has been acting as a financial adviser to help pick underwriters for the deal, according to the people.

Aramco shares fell as much as 1.7% in Riyadh.

The final lineup of advisers may still change and more banks are expected to be added before the deal launches, the people said. No final decisions have been made on the timing of the sale or the number of shares the government will offer.It’s likely to be a marketed offering that’s open for a few days for investors to submit their orders, similar to the structure adopted by the Public Investment Fund for its $3.2 billion stake sale in Saudi Telecom Co. in 2022, the people said.

Representatives for Aramco, Bank of America, JPMorgan, Moelis and Morgan Stanley declined to comment.

Low Fees

Proceeds from a new offering could help fund big initiatives by Crown Prince Mohammed bin Salman to diversify the economy away from oil.

Aramco, which has a market value of $2 trillion, raised its dividend payout to $31 billion this month despite a retreat in energy prices and lower production. That came days after Saudi Arabia’s government transferred a further $164 billion stake in the oil giant to the PIF.

A follow-on offer would come four years after Saudi Arabia raised about $30 billion in Aramco’s IPO, which was the world’s largest ever stock sale. Some of these Wall Street banks also worked on that deal, when they were paid just over $100 million for their work.

Those relatively minuscule fees are common in the region. In comparison, banks including Goldman and JPMorgan split about $60 million from helping Peloton Interactive Inc. raise $1.2 billion in 2019. The Chinese internet giant Alibaba Group Holding Ltd., which raised $25 billion in its 2014 IPO, paid about $300 million to its underwriters including performance fees.

Still, getting a role on the follow-on offer may help the banks get other business in the kingdom, which is pushing ahead with an ambitious plan to diversify the economy.