Saudi holds talks with kingdom’s richest to anchor Aramco IPO

The kingdom is aiming to raise at least 1 per cent to 2 per cent of Aramco from these investors, according to sources

Saudi Arabia held discussions with some of the kingdom’s wealthiest families about becoming anchor investors in Aramco’s mammoth stake sale, according to five people with knowledge of the talks.

Saudi officials made initial contact with some top business families on behalf of the oil giant, the people said, asking not to be identified because the information is private. Aramco may hold more formal meetings as early as next week after banks have been hired for the sale, three of the people said.

The kingdom is aiming to raise at least 1 per cent to 2 per cent of Aramco from these investors, according to one of the people. The amount each family invests will likely hinge on the company’s valuation, another person said.

Saudi Arabia is turning to its wealthiest families to ensure there’s enough demand for what could be the biggest initial public offering. The kingdom’s economy is struggling to shake off the impact of lower oil prices and a 2017 purge that ensnared dozens of billionaires and officials.

A spokesman for Aramco wasn’t immediately able to comment.

Some of the families that have been approached had relatives briefly held in the Ritz-Carlton hotel in Riyadh as part of the purge, which the government called an anti-corruption crackdown, one of the people said. They aren’t, however, being forced to invest, that person said.

Anchor investors usually commit to buying shares in a company before an IPO is opened up to other investors to control pricing and ensure that the sale is successful.

Saudi Crown Prince Mohammed Bin Salman, the architect of the IPO plan, has said he expects Aramco to be valued at over $2 trillion, but analysts see $1.5 trillion as more realistic. The company aims to select underwriters this week and is considering selling shares on the Saudi stock exchange this year or early next, with a potential international listing at a later date, Bloomberg News has reported.

Selling a stake in Aramco is a key part of the prince’s blueprint to wean Saudi Arabia off its reliance on oil, with the proceeds expected to be invested back into the economy. Plans for the IPO were put on hold last year as Aramco focused on the $69bn acquisition of a majority stake in Saudi Basic Industries Corp.

As preparations for the IPO gather pace, the kingdom named the head of its sovereign wealth fund as Aramco chairman, replacing Khalid Al-Falih, who was also later removed as energy minister.