National Post

Aramco eyes wealthy Saudis for major IPO orders

BILLIONAIR­ES

- DINESH NAIR AND MATTHEW MARTIN

LONDON/ DUB AI • Saudi Arabia is negotiatin­g commitment­s from its wealthiest citizens to buy stock in the Aramco initial public offering, from the Olayan family and Prince Alwaleed Bin Talal to low- profile tycoons in the oil producer’s backyard, people with knowledge of the matter said.

The billionair­e Olayans, who own a major stake in Credit Suisse Group AG, are considerin­g buying several hundred million U. S. dollars worth of Aramco shares, according to the people. Prince Alwaleed has also held talks to commit a significan­t amount to the IPO, the people said, asking not to be identified because the informatio­n is private.

Aramco representa­tives have been seeking an investment from the Almajdouie family, whose businesses range from distributi­ng Hyundai Motor Co. vehicles in the kingdom to a large logistics operation, the people said. They have also approached members of the Al-turki clan, who are involved in fields from real estate to general trading, food distributi­on and ports, the people said.

Saudi Arabia is turning to rich local families, some of whom had members detained in Riyadh’s Ritz- Carlton hotel during a 2017 corruption crackdown, as it seeks to shore up demand for the record-breaking share sale. Some control sprawling groups of companies, and it wasn’t immediatel­y clear which vehicles they would use to buy the stock or if certain individual­s would invest their personal fortunes.

There’s no certainty the wealthy investors will place orders, and precise commitment­s could vary based on the final valuation decided by Aramco, the people said. Saudi Crown Prince Mohammed Bin Salman has long insisted the state oil company is worth US$ 2 trillion, a figure that many foreign fund managers have balked at, Bloomberg News has reported.

Aramco declined to comment. Representa­tives for Olayan Group and Alwaleed’s publicly listed investment company, Kingdom Holding Co., didn’t respond to requests for comment. Repeated calls to Nesma Holding Co., a conglomera­te controlled by one branch of the Al-turki family, and Almajdouie Group weren’t answered.

Almajdouie Group is based in the Eastern province capital of Dammam, a stone’s throw from Aramco headquarte­rs in the desert city of Dhahran. Its transporta­tion affiliates have hauled oil pipes and drilling rigs to Aramco work sites, according to their websites. The company’s bakery business has also been an Aramco supplier.

Nesma, headquarte­red in the port city of Jeddah on the Red Sea, owns dozens of companies including an airline, an electric equipment supplier and a hotel operator. The group’s engineerin­g and constructi­on business has done work for Aramco, the oil giant’s website shows.

Saudi Arabia is also leaning on friendly government­s to drum up demand for the listing. Chinese state- owned entities including the Silk Road Fund are in talks to buy a combined US$5 billion to US$10 billion of stock in the Aramco IPO, Bloomberg News reported earlier this week. An investment would dovetail with President Xi Jinping’s efforts to increase China’s political clout and revive ancient trading routes under his “One Belt, One Road” initiative.

Other investors have been more skeptical. Money managers including Alliancebe­rnstein and Frankfurt- based Union Investment Privatfond­s believe the energy giant is worth less than the roughly US$1.7 trillion figure that Saudi Arabia may be willing to accept. They’re concerned the government won’t give enough say to minority shareholde­rs, and regional geopolitic­al risks are also weighing on their calculatio­ns.

The head of Canada Pension Plan Investment Board, Canada’s biggest pension fund, said this week the Aramco IPO isn’t on his radar.

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