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10 November 2019
BUSINESS

Saudi Aramco taps Saudi billionaires for major IPO orders

Saudi Arabia is turning to rich families as it seeks to shore up demand for the record-breaking share sale.

BLOOMBERG/RODNEY JEFFERSON


Saudi Arabia is negotiating commitments from its wealthiest citizens to acquire stock in the Saudi Aramco initial public offering (IPO), from the Olayan family and Prince Alwaleed Bin Talal to low-profile tycoons in the oil producer’s backyard, reported Bloomberg.

The billionaire Olayan Group, which owns a major stake in Credit Suisse Group, is considering buying several hundred million US dollars’ worth of Saudi Aramco shares. Prince Alwaleed has also held talks to commit a significant amount to the IPO.

Saudi Aramco representatives have been seeking an investment from the Almajdouie family, whose businesses range from distributing Hyundai Motor Company vehicles in the Kingdom to a large logistics operation. Similarly, the oil company’s representatives have also approached members of the Al-Turki clan, who are involved in fields from real estate to general trading, food distribution and ports.

Some family offices control sprawling groups of companies, and it is not immediately clear which vehicles they would use to buy the stock or if certain individuals would invest their personal fortunes.

There is no certainty the wealthy investors will place orders and precise commitments could vary based on the final valuation decided by Saudi Aramco. Saudi Crown Prince Mohammed Bin Salman has long insisted the state oil company is worth $2 trillion, a figure that many foreign fund managers have baulked at.

Almajdouie Group, another Saudi family-owned business, is based in the Eastern province capital of Dammam, a stone’s throw from Saudi Aramco headquarters in the desert city of Dhahran. Its transportation affiliates have hauled oil pipes and drilling rigs to Aramco work sites.

Nesma, headquartered in the port city of Jeddah on the Red Sea, owns dozens of companies including an airline, an electric equipment supplier and a hotel operator. The group’s engineering and construction business has done work for Saudi Aramco.

The Olayans run one of the Kingdom’s biggest family-owned conglomerates and have a member sitting on the Morgan Stanley board. The Olayan Group has since grown into a conglomerate that runs Burger King outlets across the Middle East, owns a Coca-Cola bottler and has joint ventures with Colgate-Palmolive and Kimberly-Clark Corporation.

Saudi Arabia is also leaning on friendly governments to drum up demand for the listing. Chinese state-owned entities including the Silk Road Fund are in talks to buy a combined $5 billion to $10 billion of stock in the Aramco IPO. An investment would fit together with President Xi Jinping’s efforts to increase China’s political clout and revive ancient trading routes under his ‘One Belt, One Road’ initiative.

Money managers including AllianceBernstein and Frankfurt-based Union Investment Privatfonds believe the energy giant is worth less than the roughly $1.7 trillion figure that Saudi Arabia may be willing to accept. They’re concerned the government will not give enough say to minority shareholders and regional geopolitical risks are also weighing on their calculations.

Similarly, the head of the Canada Pension Plan Investment Board said that the Saudi Aramco IPO is not on his radar. The Russian sovereign wealth fund said it does not see massive investments in Saudi Aramco from the country since Russia already has a large presence in oil and gas.


RELATED STORIES: ALLIANCEBERNSTEIN SAUDI ARAMCO OLAYAN FAMILY PRINCE ALWALEED BIN TALAL CREDIT SUISSE GROUP IPO ALMAJDOUIE GROUP CANADA PENSION PLAN INVESTMENT UNION INVESTMENT PRIVATFONDS


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