Saudi Aramco Picks J.P. Morgan, HSBC, Morgan Stanley as Lead IPO Underwriters

By Summer Said and Ben Dummett 

Saudi Arabia's state-owned energy company has told J.P. Morgan, HSBC and Morgan Stanley they will be the lead underwriters for its planned initial public offering, set to be the largest ever, according to people familiar with the matter.

The three banks will lead the giant offering of about as much as 5% of Saudi Arabian Oil Co, known as Saudi Aramco, the people said.

The three banks declined to comment. A spokesperson for Aramco said the firm doesn't comment on rumor or speculation.

Analysts say the stake being offered could fetch as much at $100 billion to $150 billion and Saudi Arabian Deputy Crown Prince Mohammed bin Salman has estimated that the entire company is valued over $2 trillion.

Much of the money raised by the IPO would go to the country's sovereign-wealth fund, which would use it to diversify the kingdom's economy through investments. The Financial Times recently reported the three were favorites to win lead roles on the deal.

The IPO's massive size and its importance as part of Saudi Arabia's National Transformation Plan to modernize the kingdom's economy and wean it off oil has pushed banks to try to win a coveted underwriter role. That competition is expected to force underwriters to accept sharply lower fees, though they still stand to gain from a bonanza of fees because of the offering's magnitude.

Participation in a successful IPO also has longer-term implications for the banks by positioning them to win additional, future business as the Middle Eastern country continues to seek advice on reshaping its economy.

Prince Mohammed has said the listing would occur in 2018. But complications restructuring Aramco and disentangling its finances from the government could delay the IPO until 2019, The Wall Street Journal reported last week.

Aramco says it managed over 260 billion barrels of oil reserves for the Saudi kingdom and pumps almost 10 million barrels a day -- far more than private-sector competitors such as Exxon Mobil Corp.

With the three main underwriters lined up, the next challenge will be to fill out the rest of the underwriting syndicate. Aramco and its advisers also need to select an exchange to list its shares following the new issue.

Aramco is leaning toward listing its giant, state-run oil company on the New York, London or Toronto exchanges and has soured on the prospect of floating shares of the firm on an Asian stock exchange, people familiar with the matter said, The Wall Street Journal reported this week.

Maureen Farrell contributed to this article.

Write to Summer Said at [e-mail] and Ben Dummett at [e-mail]

(END) Dow Jones Newswires

February 21, 2017 18:50 ET (23:50 GMT)

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