Saudi Aramco pitches Abu Dhabi investors on troubled IPO

Aramco executives from Saudi Arabia met officials at the Abu Dhabi Investment Authority (ADIA) in the United Arab Emirates (UAE) on Monday to discuss a potential investment in the oil giant’s debut share sale that could raise as much as $25.6bn, three sources familiar with the talks told Reuters News Agency.

Aramco has struggled to attract a major cornerstone or anchor investor for its initial public offering (IPO), which could potentially be the world’s biggest ever. It has also approached the Kuwait Investment Authority (KIA) and Singapore‘s sovereign wealth fund, GIC.

The meeting between Aramco and ADIA – which manages some $800bn – was separate from an investor roadshow in Abu Dhabi, the second leg of a Gulf marketing effort by Aramco and its advisers.

A similar roadshow was held in Dubai on Sunday.

A spokesman for ADIA declined to comment. Aramco has said it does not comment on specific investor meetings.

“Aramco have stepped up a gear this month, but the signs are that it is unlikely to be the blockbuster sale that the Kingdom once hoped for,” said London-based Capital Economics in a note on Monday.

“And plans for this sale to be followed by an international listing seem to have lost momentum,” it added.

Cancelled roadshows

The company has also cancelled marketing roadshows for its listing outside of the Gulf because of the lack of interest from foreign institutional investors.

Some investors who attended the Aramco roadshow in Abu Dhabi on Monday also expressed mixed feelings about investing in the deal.

Aramco’s future weight in the region’s benchmark indices was a compelling reason for fund managers in the Middle East and North Africa to invest in its shares, a fund manager said after the roadshow.

But another fund manager said Aramco’s dividend yield of 4.4 percent at the top end of its valuation was less attractive than many other publicly-traded oil companies.

For example, oil supermajor Royal Dutch Shell has a dividend yield of 6.48 percent, Refinitiv data shows.

‘Rich valuation’

Aramco is looking to sell 1.5 percent of the company in the deal, valuing the company between $1.6-1.7 trillion. It has set a base dividend of $75bn over five years.

The deal is the centrepiece of plans by Crown Prince Mohammed bin Salman (MBS) to diversify the Saudi economy away from its reliance on oil.

“For the biggest IPO in history, it is still a wait-and-see approach for us: how it will perform, who’s going to make the market,” said an investment adviser to high-net-worth investors in Abu Dhabi.

“The rich valuation, the recent attacks, the oil price, regional tensions – we are yet to get perspective on this,” the adviser added.

Aramco’s roadshow was led by Yasser Mufti, vice president of strategy and market analysis, and attended by members of the oil firm’s IPO team, according to an investor invite seen by the Reuters.

Retail subscription for the IPO reached 21.77 billion Saudi riyals ($5.8bn) on Monday, lead manager Samba Capital said.

The retail element of the sale so far amounts to a total of 680,254,540 shares, the firm said in a statement.

The last day of subscription for the retail tranche of the share sale is November 28, it said, having launched on November 3.

The oil giant said it plans to sell about three billion shares, at an indicative price range of 30-32 Saudi riyals (about $8.25), valuing the IPO at as much as 96 billion Saudi riyals ($25.6bn).