By Rory Jones and Summer Said in Dubai and Maureen Farrell in New York
Global investment bankers launched the underwriting process for
the initial public offering of Saudi oil giant Aramco in Dubai on
Thursday, a sign financiers who shunned the kingdom in the
immediate aftermath of the murder of journalist Jamal Khashoggi are
turning the page.
Government-owned Saudi Arabian Oil Co. has so far chosen nine
banks to underwrite its listing: JPMorgan Chase & Co., Morgan
Stanley, Goldman Sachs Group Inc., Bank of America Merrill Lynch,
Citigroup Inc., HSBC Holdings PLC, Credit Suisse Group AG and two
domestic investment banks, according to people familiar with the
details.
The IPO is expected to reap billions of dollars for Crown Prince
Mohammed bin Salman's social and economic reform program, which is
aimed at diversifying the kingdom's economy beyond oil and
improving Saudis' standard of living. That effort has come
alongside a crackdown on the domestic business community and a
silencing of political dissent.
Bankers have shown they are willing to move past the murder to
win business in Saudi Arabia, but it is unclear whether large
numbers of foreign investors are ready to bet on Prince Mohammed's
vision. Foreign direct investment in Saudi Arabia remains meager
and few international firms have placed big bets on the country
since Mr. Khashoggi's murder.
Senior-level bankers are expected to gather in Dubai on Thursday
for the first meeting of the underwriting team, the people said.
Aramco plans an IPO in two stages: first on the domestic Saudi
stock market before pursuing an international debut next year or in
2021.
JPMorgan, HSBC, Morgan Stanley, Citi and Credit Suisse declined
to comment on their involvement in the IPO.
Aramco expects to list about 1% of itself before the end of the
year, in what Saudi analysts are calling a movie trailer for
foreign investors ahead of an international listing. Foreigners can
access the Saudi market but local investors are expected to
subscribe to the IPO, limiting global participation.
Prince Mohammed has said he eventually wants to list 5% and
expects a valuation for Aramco, the world's most profitable
company, of about $2 trillion. Analysts estimate the company is
worth closer to $1.5 trillion, based on financials released earlier
this year and the uncertain outlook for oil prices.
Bankers who pitched for the Saudi Aramco IPO, however, put
forward valuations above $2 trillion, according to an Aramco
adviser familiar with the process.
"At one point it looked like it was a race for who is going to
give the highest valuation," the Aramco adviser said.
A $12 billion bond sale by Aramco in April drew $100 billion in
orders, giving an indication of how popular investors might view a
listing, depending on the valuation.
Global investment banks have salivated at the chance of
arranging an IPO for Aramco since 2016, when Prince Mohammed said
he planned a listing.
Aramco initially chose three banks to underwrite the IPO:
JPMorgan, a banker to the oil firm for decades; Morgan Stanley and
HSBC, which has groomed many Saudi officials for office. Saudi
officials then delayed the listing over transparency concerns and
costs and then more recently started a new search for
underwriters.
After Mr. Khashoggi's killing in Saudi Arabia's consulate in
Istanbul last year, top executives including JPMorgan's James
Dimon, HSBC's then-CEO John Flint and Credit Suisse's Tidjane Thiam
all pulled out of the Saudi sovereign-wealth fund's flagship
investment conference.
After the murder, Morgan Stanley CEO James Gorman was one of the
first global leaders to publicly sit down with Saudi officials as
part of a discussion at the World Economic Forum in Davos,
Switzerland. Mr. Flint also flew into Riyadh in April for a panel
discussion on the financial sector.
The managing director of Saudi Arabia's sovereign-wealth fund,
Yasir Rumayyan, was last week made chairman of Aramco and his fund
has helped screen investment banks on the Aramco IPO, people
familiar with the pitching process said.
Goldman Sachs has made a particular effort in the past couple of
years to woo Saudi officials, including Mr. Rumayyan, people
familiar with the outreach said.
The investment bank made Dina Powell, former deputy national
security adviser to the Trump White House and an Arabic speaker,
the point person for Saudi officials. Ms. Powell is one of the
bankers expected at the first IPO meeting on Thursday in Dubai, a
person familiar with the process said. Richard Gnodde, CEO of
Goldman International, also has played a major role, said another
person familiar with the process.
The Aramco mandate is also a coup for Citi. The bank has sought
a comeback in the kingdom after exiting the market in 2004. New
York-based Tyler Dickson, head of global markets, is leading the
bank's relationship with Aramco, according to an Aramco
adviser.
Write to Rory Jones at rory.jones@wsj.com, Summer Said at
summer.said@wsj.com and Maureen Farrell at
maureen.farrell@wsj.com
(END) Dow Jones Newswires
September 12, 2019 08:31 ET (12:31 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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