Saudi Arabia in Discussions with American Banks for Aramco Offering

The Kingdom of Saudi Arabia is currently in discussions with major Wall Street banks to manage the secondary offering of shares in its giant oil company, Aramco. This move comes as the country continues to push forward with one of the largest stock offers in the world, which has been in the works for the last few years. According to reports from Bloomberg, the Kingdom is looking to appoint JP Morgan Bank as one of the main guarantors of the offering, with Bank of America and Morgan Stanley also competing for leadership roles in the deal. The offering is expected to raise up to $20 billion, making it a highly anticipated event in the financial world.

Background on the Aramco Offering

Saudi Aramco, officially known as the Saudi Arabian Oil Company, is a state-owned oil and gas company based in Dhahran, Saudi Arabia. It is considered to be the most valuable company in the world, with an estimated value of $2 trillion. In 2019, the company made its initial public offering (IPO) on the Saudi Stock Exchange, raising $29.4 billion and becoming the largest IPO in history. However, the government still holds a majority stake in the company and has been planning to sell additional shares in order to diversify its economy and reduce its reliance on oil revenues.

In May 2021, Bloomberg reported that the Kingdom was considering offering an additional share of Saudi Aramco shares, valued at billions of dollars, on the Saudi Stock Exchange. This move would provide an opportunity for international investors to own a stake in the company, which was previously only available to Saudi citizens. The discussions with American banks for the Aramco offering are seen as a crucial step towards achieving this goal.

The Role of American Banks in the Aramco Offering

Potential Guarantors for the Offering

According to Bloomberg, the Kingdom of Saudi Arabia is currently in discussions with several American banks to manage the Aramco offering. These discussions are said to include appointing JP Morgan Bank as one of the main guarantors of the deal, with Bank of America and Morgan Stanley also competing for leadership roles. This means that these banks would be responsible for underwriting and selling the shares to investors.

The selection of these banks is crucial for the success of the offering, as they will play a major role in determining the price and demand for the shares. Having reputable and experienced banks involved in the process can help instill confidence in potential investors and ensure a smooth and successful offering.

Financial Advisors for the Offering

In addition to the potential guarantors, reports have also indicated that Moelis Bank is acting as a financial advisor to help choose the banks that will lead the deal. This is a common practice in large offerings, where an independent financial advisor is brought in to assist in the decision-making process. The final lineup of advisors may change, and it is expected that more banks will be added before the deal is launched.

The involvement of Moelis Bank as a financial advisor highlights the importance of this offering for the Kingdom of Saudi Arabia. It shows that the government is taking all necessary steps to ensure the success of the offering and attract a wide range of investors.

Potential Structure of the Aramco Offering

Reports from Bloomberg have also shed light on the potential structure of the Aramco offering. It is likely that there will be a market offer open for a few days for investors to submit their applications, similar to the structure adopted by the Public Investment Fund (PIF) for its $3.2 billion stake in Saudi Telecom Company in 2022. This structure allows for a fair and transparent process, giving all interested parties an equal opportunity to participate in the offering.

The timing of the sale and the number of shares to be offered have not been finalized yet, as the discussions with American banks are still ongoing. However, it is expected that the offering will raise up to $20 billion, making it one of the largest stock offers in the world.

Conclusion

The discussions between Saudi Arabia and American banks for the Aramco offering mark a significant step towards diversifying the country's economy and reducing its reliance on oil revenues. The involvement of major Wall Street banks and the potential structure of the offering indicate that the Kingdom is taking all necessary steps to ensure the success of the deal. As the details of the offering continue to unfold, it will be interesting to see how this historic event plays out and what impact it will have on the global financial market.