Picture: REUTERS/HAMAD I MOHAMMED
Picture: REUTERS/HAMAD I MOHAMMED

Dubai — When Saudi Arabia announced plans to sell shares in its crown jewel Aramco, international bankers scrambled to get a piece of the action. Three years on, they’re questioning whether what could be the world’s biggest initial public offering (IPO) is worth their time and effort.

Some banks, which worked on the deal for more than two years before the oil giant put it on hold, are having internal discussions about whether to re-pitch for a role as the kingdom restarts preparations for the listing, according to people with knowledge of the matter.

Banks originally associated with the plans — including Evercore, Moelis, HSBC Holdings, JPMorgan Chase and Morgan Stanley — were celebrated for landing roles. They were going to get a cut of a share sale that was expected to raise $100bn and an advantage in pitching for future deals in the oil-rich kingdom. But that was before Aramco’s $69bn deal for local chemical giant, Saudi Basic Industries, put everything on hold.

Now, Saudi Arabia’s Crown Prince Mohammed bin Salman insists the IPO will take place in 2020 or 2021. While Saudi Arabia and Aramco remain key for business, some executives are concerned that they’ve spent too much time working for a small retainer fee, and would prefer to devote themselves to more lucrative deals, the people said, asking not to be identified because the discussions are private.

Even with these concerns, banks are aware that there could be business and political consequences if they don’t put themselves forward for a role and many will probably decide to pitch in the end, according to the people. The reluctance of some banks to be involved is also being seen as a tactic for Aramco to increase its fees, some of the people said.

Restarting work

The company, officially known as Saudi Arabian Oil Company, recently held talks with a select group of investment banks to discuss potential roles, people familiar with the matter said earlier this month.

Prince Mohammed first said Aramco was considering an IPO in 2016 as part of plans to modernise the Saudi economy.

With such high stakes, some banks are still keen to have a role on the offering, despite the delays. One firm that didn’t work on the original deal plans to do whatever it can to be hired this time around, mainly because of the size of the offering, according to an executive at that bank.

Representatives for HSBC, JPMorgan, Moelis and Evercore declined to comment. Aramco and Morgan Stanley didn’t immediately respond to requests for comment.

With Sarah Algethami and Archana Narayanan

Bloomberg