Saudi Aramco is set to pay up to $450m in fees to IPO advisers

Advisers working on Saudi Aramco’s mammoth share sale may split a fee pool of as much as $450m, according to people with knowledge of the matter, making it one of the biggest IPO pay outs globally.

The oil giant is set to pay between $350m and $450m to a group of more than 20 banks working on its initial public offering, the people said, asking not to be identified because the information is private. The payment would represent a fee of about 1 per cent on the $40bn Aramco is seeking to raise — relatively low compared to other markets.

JPMorgan Chase & Co. and Morgan Stanley are expected to be paid the most, the people said. The final amount paid to banks will depend on how much Aramco raises, they said. A representative for Aramco declined to comment.

Investment bankers from around the world have been pitching for years to win a coveted role on Aramco’s IPO. Many firms have been investing heavily into the kingdom on expectations of a fee bonanza as the country diversifies away from oil. Many have been left disappointed though as deals have been delayed or failed to materialise.

Falling short

Even though Aramco’s would be one of the biggest fee pools for investment banks, it would still fall short of the $535m Softbank Group Corp. paid when it raised $21bn by selling shares in its Japanese telecommunications business last year.

Still, perhaps bankers shouldn’t complain too much. When Saudi Arabia’s National Commercial Bank raised $6bn in its 2014 IPO, advisers including HSBC and Gulf International Bank were paid just 0.1 per cent of the offering value.

Aramco advisers

Aramco’s board is planning to meet with its advisers on the IPO around Oct. 17 to give final approval for the share sale, according to other people familiar with the matter. Aramco is speeding up preparations for the IPO with an aim of listing on the Saudi bourse as soon as November, Bloomberg News has reported.

The draw of working on what’s set to be the world’s biggest IPO — even for relatively low compensation — has attracted some of the top Wall Street names. Aramco appointed nine global co-coordinators, including Goldman Sachs Group Inc., HSBC Holdings Plc and Credit Suisse Group AG. There are also 15 book runners and three financial advisers.

Alibaba Group Holding paid $300m to banks when it raised $25bn in the biggest IPO to date.