Saudi Aramco is poised to pay a combined $64 million to the banks that arranged the world’s largest initial public offering (IPO), a disappointment for the Wall Street firms that pitched aggressively for a spot on the deal, reported Bloomberg.
The figures represent the base fee being paid by Saudi Aramco, which will decide the amount of discretionary incentive fees at a later date. If Saudi Aramco opts to dole out additional money, most of it would likely go to the domestic banks that brought in the bulk of the IPO orders.
The Gulf oil producer raised $25.6 billion in its share sale, which became a local affair after foreign fund managers shunned its premium valuation. The base fee, representing 0.25 per cent of the funds raised, pales in comparison to other large deals.
Chinese internet giant Alibaba Group Holding, which raised $25 billion in its 2014 IPO, paid about $300 million to its underwriters including performance fees.
Saudi Arabia did not need the Wall Street firms’ international networks after it scrapped roadshows outside the Middle East, turning instead to local retail buyers and wealthy families to shore up the deal.
The oil producer will pay local banks serving as bookrunners around SAR 5 million each while foreign banks in that position will receive around SAR 2 million.
Saudi Aramco appointed Bank of America, Citigroup together with Credit Suisse, Goldman Sachs as well as HSBC, JPMorgan and Morgan Stanley as joint global coordinators.
Similarly, Saudi-based NCB Capital and Samba were also part of global coordinators on the deal.
Additionally, sixteen other banks were appointed as joint bookrunners on the deal including Al Rajhi Capital, BNP Paribas, BOC International, Credit Agricole, Deutsche Bank, EFG-Hermes, First Abu Dhabi Bank, Gulf International Bank, Mizuho, Royal Bank of Canada, Riyad Bank, Santander, Saudi Fransi Capital, Societe Generale, Sumitomo Mitsui Financial Group and UBS.