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24 November 2019

Saudi Arabia side-lines wall street lenders on Saudi Aramco IPO

Proceeds from the public share sell will be transferred to the Public Investment Fund, which has been making a number of bold investments including $45 billion into SoftBank Group’s Vision Fund, a $3.5 billion stake in Uber Technologies and planning a $500 billion NEOM city.

JPMorgan Chase & Co./Bloomberg

Saudi Arabia side-lined global banks advising on Saudi Aramco’s initial public offering (IPO) after the deal was pared back to a mainly domestic affair, reported Bloomberg.

JPMorgan Chase & Co. and Morgan Stanley are among global coordinators that have been marginalised as the oil giant turns to local lenders Samba Financial Group and National Commercial Bank as well as HSBC Holdings to handle investor orders.

Bank of America Corporation, Citigroup as well as Credit Suisse Group, Goldman Sachs Group—also global coordinators—have been told to submit their orders through the three banks. The international banks will not have access to the IPO orderbook without Saudi Aramco’s permission.

More than 20 global investment banks are working on Saudi Aramco’s public share sell after it was finally given the green light following repeated delays. Senior bankers delivered pitches that Saudi Aramco would be able to achieve Crown Prince Mohammed bin Salman’s $2 trillion target. Saudi officials are now frustrated Wall Street’s biggest names were unable to deliver on those promises.

The banks are also set to miss out on an expected fee bonanza after foreign investors snubbed the deal and Saudi Aramco decided not to market the share sale outside the Middle East.

The offering will now rely mainly on local investors after most international money managers baulked at even the reduced-price target of $1.6 trillion to $1.71 trillion.

In October 2019, Bloomberg reported that Saudi Aramco was expected to pay the more than two dozen advisers on the deal, including banks, lawyers as well as marketing and advertising agencies, between $350 million to $450 million. The final payments will depend on how much equity banks are able to place with investors.


RELATED STORIES: Saudi Aramco Crown Prince Mohammed bin Salman Bank of America Corporation Citigroup HSBC Holdings Credit Suisse Group Goldman Sachs Group





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