Saudi Arabia picks Aramco IPO advisors

20 April 2016

Riyadh plans to list less than 5 per cent of Aramco’s parent company

Saudi Arabia has selected US-based lender JPMorgan and Michael Klein, an investment banker who runs his own advisory boutique, to advise on Saudi Aramco’s share sale.

Klein is advising the government, while JPMorgan is helping with initial public offering (IPO) preparations, according to news agency Bloomberg, which cited people familiar with the matter. JPMorgan could be among the banks that will underwrite the listing. The deliberations are at early stages, and the government has yet to take a final decision on the IPO of the world’s biggest oil producer.

Saudi Arabia is introducing sweeping reforms to cut its dependence on the sale of hydrocarbons for revenues after oil slumped from a mid-2014 peak. The kingdom, the biggest regional economy, is running an austerity campaign and is looking to monetise some of its assets to generate alternative revenues. Riyadh has identified about 146 companies, which it plans to take to public or strategic private investors.

The kingdom, which expects a SR326bn ($87bn) budget deficit in 2016, is mulling plans to sell a less-than 5 per cent stake in Aramco’s parent company in an IPO as soon as next year, or in 2018, and transfer the remaining ownership to the Public Investment Fund (PIF) to inflate its size to about $2 trillion, Deputy Crown Prince Mohammed bin Salman al-Saud told Bloomberg in an earlier interview.

Aramco will be listed on the Saudi Stock Exchange (Tadawul), a move that could turn the oil giant into the largest publicly traded firm with a value in the trillions of dollars.

Representatives for Aramco and JPMorgan declined to comment while Klein did not immediately respond to an emailed request for comment from Bloomberg.

JPMorgan has worked on several large deals in the kingdom. It was the sole international financial adviser on the $2.5bn IPO of Saudi Arabian Mining Company in 2008. The bank, along with HSBC, also helped arrange a $10bn loan for Aramco last year.

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