HSBC and JPMorgan Well Ahead In ARAMCO IPO Race

By Staff Writer

Jan 09, 2016 08:20 PM EST

HSBC Holdings Plc and JPMorgan Chase & Co. remain atop among the international lenders to win a role in the IPO of a state owned oil company. Saudi Arabian Oil Company's (ARAMCO) Initial Public Offerings have widely been believed as a juicy target for any ambitious Wall Street Bank.

Both the banking giants have made their inceptions in the kingdom decades ago. They have reportedly helped the state owned oil company to get a $10 billion loan during last year. This event has been analyzed to keep the two pioneer banks ahead of other competitors while grabbing the chunks in the IPO. However the IPO value may vary within a range of $1 trillion to $10 trillion, aiming to transform the oil company as the most valuable company in the world.

Deutsche Bank AG has advised ARAMCO on its $3 billion joint venture with Lanxess AG in September. Thus it appears as another favorite to be hired for a role. ARAMCO is also planning to appoint some of its key local lenders from the kingdom for the IPO. No mandates have been awarded yet and ARAMCO hasn't sent out requests seeking advisory roles, reports Bloomberg citing sources inside who request for anonymity.

The Kingdom of Saudi Arabia (KSA) is eager to allow ARAMCO to extract more earning from crude oil in a bid to boost the stake holders. Potential investors are keenly waiting to learn the earning sharing phenomenon of the company. However, the oil company values above $ 1 trillion, estimated on the basis of daily production of 10 million barrels, reports The New York Times.

The Saudi government is reluctant in getting inflicted to a catastrophic war with Iran. Instead they intend to diversify state income through imposing certain taxes and making ARAMCO public in a bid to create job opportunities for the Saudis, according to report published in the Arab News.

ARAMCO is likely to choose banks for the IPO among those who has helped in arranging loans and other relevant deals. This strategy has put the less experienced (in terms of operations in the kingdom) banks such as Goldman Sachs Group Inc. and Morgan Stanley -- at a potential disadvantage.

HSBC has act as the sole international adviser on the $6 billion IPO of National Commercial Bank in 2014, the largest ever listing across the Middle East. The bank is also experienced for advising ARAMCO in floating a subsidiary in the local stock market in 2008. JPMorgan has acted the sole international adviser on the $2.5 billion IPO of Saudi Arabian Mining Co. in 2008.

KSA is believed to go for IPO of ARAMCO in a bid to raise $1 to $10 trillion in capital. As per the plan, the Saudi government opts for creating employment opportunities instead of getting engaged in war with Iran. On the basis of experience for decades, HSBC and JPMorgan along with some local banks and investors are well ahead in grabbing the prospective IPO chunks.


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