Abu Dhabi said to eye up to $1.5b Aramco IPO stake

Attendees huddle around a laptop computer as they sit below a Saudi Arabian Oil Co. (Aramco) sign, inside the King Abdulaziz Center for World Culture during a tour of the project in Dhahran, Saudi Arabia, on Friday, Nov. 25, 2016. Photographer: Simon Dawson/Bloomberg

Abu Dhabi is planning to put as much as $1.5 billion into Saudi Aramco’s initial public offering, as the oil giant taps friendly neighbors to prop up a deal that’s so far failed to draw foreign investors, people with knowledge of the matter said.

The emirate is seeking to make the investment through one or more state-linked entities, according to the people, who asked not to be identified because the information is private. Aramco representatives are meeting officials of some top Abu Dhabi funds and companies this week to discuss the potential commitments, the people said.

Bringing in a major investor from outside the kingdom would be a relief for Saudi Arabia after plans to market the IPO globally were abandoned. Aramco had high hopes of drawing in sovereign investors, including a big commitment from China, but has yet to announce any firm commitments.

Crown Prince Mohammed bin Salman, who’s made the record share sale a centerpiece of his plan to modernize the Saudi economy, will make an official visit to Abu Dhabi on Wednesday, according to Saudi TV station Al-Arabiya.

Local investors

The Abu Dhabi government hasn’t made a final decision on which state entities will participate in the deal, and the precise size of the investment could change, the people said. Aramco declined to comment. The Abu Dhabi government’s media office didn’t immediately respond to requests for comment.

If Abu Dhabi puts in an order of that size it would mean that the institutional offering is almost certainly fully covered. Institutional subscriptions totaled 58.4 billion riyals ($15.6 billion), lead manager for the offering Samba Capital said in a statement on Nov 21, representing about 90% of the institutional tranche.

The Saudi government plans to raise more than $25 billion, selling a 1.5% stake in the company at a valuation of between $1.6 trillion and $1.7 trillion. Of that, 1% is earmarked for institutional investors and the rest for Saudi retail buyers.

After international money managers balked at the valuation Crown Prince Mohammed wanted for the company, Aramco decided to lean heavily on local investors, large and small, to get the job done. They have secured commitment from some of the kingdom’s wealthiest families, many of whom had members imprisoned in Riyadh’s Ritz-Carlton hotel in 2017 during a so-called corruption crackdown.

The banking system is also being used to boost demand. The Saudi Arabian Monetary Authority will allow smaller retail investors to borrow twice their cash investment, double the normal leverage limits the regulator allows for IPOs, according to people familiar with the matter.

Bloomberg

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Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.