Saudi Arabia to Sell Aramco Stake, Aiming to Raise $13.1 Billion for Economic Diversification


NEW YORK, May 30 (Reuters) – Saudi Arabia has announced plans to sell a new stake in its state oil giant, Aramco, which could generate up to $13.1 billion. This significant deal aims to support Crown Prince Mohammed bin Salman’s strategy to diversify the Saudi economy.

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The Saudi government could raise $12 billion by offering approximately 1.545 billion Aramco shares, representing about 0.64% of the company, if priced at the upper end of the 26.7 ($7.12) to 29 riyals range, as per Aramco’s filing on the Riyadh Stock Exchange. With a greenshoe option, allowing for the sale of nearly 1.7 billion shares (0.7% stake), the total value could rise to $13.1 billion.

This anticipated share sale has long been awaited as part of Aramco’s efforts to broaden its investor base while generating funds to accelerate Saudi Arabia’s economic diversification program. “The offering provides us with an opportunity to broaden the shareholder base amongst both Saudi and international investors,” Aramco CEO Amin Nasser stated.

This move is the latest in a series of efforts to divest portions of one of the world’s most valuable companies, following Aramco’s record-setting IPO in 2019, which raised $29.4 billion. Around 10% of the new offering will be reserved for retail investors, depending on demand. The offering could happen as soon as June, sources told Reuters.

Aramco remains a crucial financial source for the Saudi government, funding a massive economic drive to reduce its dependency on oil. This latest deal will help finance significant domestic projects linked to this agenda, explained Hasan Alhasan of the International Institute for Strategic Studies. Facing a budget deficit and missing foreign direct investment targets, Saudi Arabia is turning to the sale of Aramco equity and debt issuances.

Aramco shares closed slightly lower on Thursday at 29.1 riyals ($7.76), giving the company a market capitalization of about $1.87 trillion. Despite a drop in profit by nearly a quarter, the company increased dividends to almost $98 billion in 2023 and expects an outlay of $124.3 billion this year.

Aramco has also expanded its investments in refineries, petrochemical projects, and retail and trading businesses globally, including its first foray into liquefied natural gas. The joint global coordinators for the deal include Morgan Stanley, Citi, Goldman Sachs, HSBC, Saudi National Bank, Bank of America, and JPMorgan.

Crown Prince Mohammed bin Salman has invested heavily in diversifying the Saudi economy away from oil, pouring funds into sectors like renewable energy, technology, tourism, logistics, and manufacturing. However, lower oil prices and production have impacted economic growth, leading to a fiscal deficit.

Aramco introduced a special performance-based dividend last year to attract new investors and provide cash to the kingdom. The company has also increased the number of market-makers to improve share liquidity.

Despite trading at a higher price-to-earnings ratio than other global oil companies, Aramco’s stock has dropped about 12% this year. Saudi Arabia, the leading member of OPEC, currently produces about 9 million barrels of crude daily, complying with OPEC+ output cuts. OPEC+ will decide on future production policies this Sunday, with potential impacts on oil prices and Aramco’s revenues.

($1 = 3.7506 riyals)

Naija247news is an investigative news platform that tracks news on Nigerian Economy, Business, Politics, Financial and Africa and Global Economy.

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