(CTN News) – Saudi Arabia has initiated proceedings to sell a new stake in its state oil giant Aramco (2222.SE), aiming to raise up to $13.1 billion in a move crucial for financing Crown Prince Mohammed bin Salman’s ambitious economic diversification agenda.
According to the filing made on Thursday, the Saudi government plans to offer approximately 1.545 billion shares of Aramco, equivalent to about 0.64% of the company, at a price range of 26.7 to 29 riyals per share.
This initial offering could raise $12 billion if priced at the top of the range. Additionally, there is a greenshoe option which could bring the total to $13.1 billion, allowing for the sale of an additional 1.7 billion shares, or 0.7% of Aramco.
Aramco CEO Amin Nasser emphasized the strategic importance of the offering, stating,
“The offering provides us with an opportunity to broaden the shareholder base amongst both Saudi and international investors. It also offers us an opportunity to increase liquidity and to increase our global index weighting.”
The sale marks a significant milestone following Aramco’s record-setting IPO in 2019, which raised $29.4 billion. A portion of the shares in this latest offering, about 10%, will be reserved for retail investors, subject to demand.
Since its IPO, Aramco has remained a cornerstone of Saudi Arabia’s economy, funding large-scale projects aimed at reducing the country’s dependency on oil revenues.
Hasan Alhasan, senior fellow at the International Institute for Strategic Studies, commented on the broader implications of the sale, stating, “The kingdom is likely to continue redirecting capital to other sectors including renewable energy, technology, tourism, logistics, and manufacturing.”
Aramco Stake Sale: Key Steps in Saudi Arabia’s Economic Diversification Drive
Saudi Arabia’s economic plans have faced challenges, with lower oil prices impacting revenue, leading to a projected budget deficit of up to $21 billion. The current offering is seen as part of the effort to bolster finances and further diversify the economy.
Global Coordinators and Local Bookrunners
The joint global coordinators for the deal include Morgan Stanley, Citi, Goldman Sachs, HSBC, Saudi National Bank, Bank of America, and JPMorgan. Local banks Al Rajhi Capital, Riyad Capital, and Saudi Fransi Capital are acting as joint bookrunners.
Saudi Arabia’s Role in Global Oil Markets
Saudi Arabia, as the de facto leader of the Organization of the Petroleum Exporting Countries (OPEC), has been pivotal in managing global oil markets through OPEC+ agreements, which have impacted Aramco’s production levels and revenues.
Market Performance and Strategic Goals
Aramco’s shares closed slightly lower at 29.1 riyals ($7.76) on Thursday, reflecting a market capitalization of about $1.87 trillion. Despite challenges, Aramco has maintained its position as the world’s most valuable company by market capitalization.
Strategic Importance of the Offering
The success of this offering is crucial for Saudi Arabia’s plans to reduce its reliance on oil revenues and stimulate long-term economic growth through investment in new sectors.
This stake sale is a significant step in the kingdom’s efforts to diversify its economy and navigate through fiscal challenges posed by fluctuations in oil prices.