Aramco Set to Pay Banks $64MM for Record IPO



Aramco Set to Pay Banks $64MM for Record IPO
Saudi Aramco is poised to pay a combined $64 million to the banks that arranged the world's largest initial public offering.

(Bloomberg) -- Saudi Aramco is poised to pay a combined $64 million to the banks that arranged the world’s largest initial public offering, a letdown for the Wall Street firms that pitched aggressively for a spot on the deal, people with knowledge of the matter said.

The Gulf oil giant plans to pay the top local banks on the deal -- known as joint global coordinators -- 39 million riyals ($10.4 million) apiece, according to the people. The top foreign banks on the deal are set to each get 13 million riyals, or the equivalent of $3.5 million, the people said, asking not to be identified because the information is private.

The figures represent the base fee being paid by Aramco, which will decide the amount of discretionary incentive fees at a later date, the people said. If Aramco opts to dole out additional money, most of it would likely go to the domestic banks that brought in the bulk of the IPO orders.

Aramco raised $25.6 billion in its share sale, which became a local affair after foreign fund managers shunned its premium valuation. The base fee, representing 0.25% of the funds raised, pales in comparison to other large deals.

IPO banks globally earned average fees equal to 4.1% of the deal size this year, up from 3.6% last year, according to data compiled by Bloomberg. Chinese internet giant Alibaba Group Holding Ltd., which raised $25 billion in its 2014 IPO, paid about $300 million to its underwriters including performance fees.

Saudi Arabia didn’t need the Wall Street firms’ international networks after it scrapped roadshows outside the Middle East, turning instead to local retail buyers and wealthy families to shore up the deal. The foreign underwriters on the deal will barely make enough to cover their costs, Bloomberg News has reported.

Aramco will pay local banks serving as bookrunners, a more junior role, about 5 million riyals each while foreign banks in that position will be paid about 2 million riyals apiece, the people said.

The company declined to comment.

Aramco’s bankers

  • The IPO was led by nine joint global coordinators: Bank of America, Citigroup, Credit Suisse, Goldman Sachs, HSBC, JPMorgan, Morgan Stanley, NCB Capital and Samba
  • Sixteen other banks had a lower role on the deal as joint bookrunners: Al Rajhi Capital, BNP Paribas, BOC International, Credit Agricole, Deutsche Bank, EFG-Hermes, First Abu Dhabi Bank, Gulf International Bank, Mizuho, Royal Bank of Canada, Riyad Bank, Santander, Saudi Fransi Capital, Societe Generale, Sumitomo Mitsui Financial Group and UBS

--With assistance from Dinesh Nair.

To contact the reporters on this story:
Sarah Algethami in Riyadh at salgethami@bloomberg.net;
Matthew Martin in Dubai at mmartin128@bloomberg.net;
Archana Narayanan in Dubai at anarayanan16@bloomberg.net

To contact the editors responsible for this story:
Ben Scent at bscent@bloomberg.net;
Stefania Bianchi at sbianchi10@bloomberg.net
Michael Hytha



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