The state-owned oil giant wants to avoid litigation risks that could result from selling the deal to US-based institutions, according to the sources. Aramco is consulting with its bankers on the pros and cons of different deal structures, and it hasn’t made any final decision, the sources said.
Many foreign IPOs rely on the “Rule 144A” structure, which allows overseas companies to market offerings to institutional investors in the United States. The method being considered by Aramco is a so-called “Regulation S only” transaction, which would limit it to selling stock to foreign buyers and overseas units of US fund houses, the sources said.
While that means that Aramco could still market the IPO to big investors like BlackRock Inc and Fidelity Investments via their foreign affiliates, US institutions without overseas subsidiaries would be left out. That would limit the pool of potential buyers for an offering that’s slated to be one of the biggest equity offerings in history.
Saudi Crown Prince Mohammed Salman, the architect of the IPO plan, has previously said he expects Aramco to be valued at over US$2 trillion.
Given those lofty expectations, Aramco will need all the help it can get to sell the deal. It has selected firms including Bank of America Corp, Citigroup Inc, Credit Suisse Group AG, Goldman Sachs Group Inc, JPMorgan Chase & Co and Morgan Stanley for top roles on the transaction, sources said earlier this week.Aramco is choosing as many as nine joint global coordinators including some Middle Eastern banks, according to the sources. Saudi officials have also held discussions with some of the kingdom’s wealthiest families about becoming anchor investors in the offering, Bloomberg News has reported.
Aramco is planning to sell shares on the Saudi stock exchange as soon as November and plans to hold a kick-off meeting with underwriters as soon as this week, sources have said.
The company, formally known as Saudi Arabian Oil Co, didn’t immediately respond to a request for comment.
Other Saudi companies have started taking steps to rope in US investors after the country began allowing foreign fund managers direct access to one of the world’s most restricted major stock exchanges.
Earlier this year, mall operator Arabian Centres Co conducted the first IPO by a Saudi company under Rule 144A, raising US$659mil, data compiled by Bloomberg show. — Bloomberg
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