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Saudi Arabia is selling about $12 billion worth of shares in its national oil company Saudi Aramco as the kingdom seeks more capital for its sovereign wealth fund.
The Saudi government will sell at least 1.545 billion shares, or 0.64 percent, of the world’s largest oil company at a price between SR26.7 and SR29.
The Saudi kingdom also has the option to sell an additional 154.5 million shares at the final price. If fully exercised, the option would net the kingdom an additional billion dollars.
Saudi Aramco CEO Amin Nasser said the timing of the sale was determined by the government, but the offer was an opportunity for the company to broaden its international investor base. He declined to name an anchor investor in the offering, saying the process would begin on June 2 and end on June 6.
“This transaction provides current and new investors with the opportunity to build a significant position in Saudi Aramco at a price where we believe the company provides attractive value and growth to our shareholders,” he said, adding that Aramco would spend $98 billion had paid out in dividends. in 2023 and expects to pay out $124 billion this year.
The Aramco share price has fallen since the beginning of the year and stood at SR29 on Thursday. But Nasser denied that the secondary offer was at a discount to the blockbuster IPO in 2019, explaining that two additional rounds of bonus shares meant Aramco investors had paid SR26.4 per IPO share.
Aramco advisers had been making final preparations for a secondary share offering in Saudi Arabia for several days before a decision was made by Crown Prince Mohammed bin Salman, people familiar with the matter said.
The offering represents the culmination of a years-long plan to sell more shares in the state-owned oil producer following its record listing in 2019. The sale also coincides with Opec’s biennial ministerial meeting on Sunday, when the Saudi-led cartel will decide oil production levels for the rest of the year.
Saudi Aramco’s litany of advisers have been involved in stop-start preparations for a share sale for months. At least twice, the government has decided at the last minute not to go ahead, one of the people said.
The sale comes as Saudi Arabia is reviewing a number of mega-projects amid concerns about the costs of an ambitious economic diversification plan.
As the government focuses on maintaining robust growth outside the oil industry, the kingdom’s sovereign wealth fund, the Public Investment Fund, is likely to be the main beneficiary of a stake sale in the country’s main revenue generator. Nasser said the sale would not benefit Aramco’s investment plans.
The PIF is the main investment vehicle the crown prince uses to drive the overhaul of the Saudi economy and was the main recipient of funds from the original initial public offering in late 2019.
In that listing, Saudi Arabia initially raised $25.6 billion by selling 3 billion shares, equivalent to 1.5 percent of the company, with the proceeds going to the PIF. A month later, it sold another 450 million shares, bringing the proceeds from the sale to $29.4 billion.
The government has repeatedly increased PIF funds in recent years, including by $40 billion from the central bank’s foreign reserves at the outbreak of the Covid-19 pandemic. The state then transferred 4 percent of Saudi Aramco’s shares to the PIF in early 2023, followed by another 8 percent last March.
The transfers helped increase the size of PIF’s assets under management and provided it with a source of income through Aramco dividends. The company said on Thursday that the latest share sale would come from the government’s shareholding rather than that of the PIF.
The PIF had $925 billion in assets under management at the end of 2023, with the aim of increasing this to around $1 trillion by 2025.