Saudi Aramco Picks Moelis to Advise on Biggest IPO

  • Advisory mandate seen as coup for New York investment bank
  • Moelis was competing with Evercore Partners for role in IPO

Why Does Saudi Aramco Need to Issue a Bond?

Saudi Arabian Oil Co. hired Moelis & Co. to advise on its initial public offering, according to people familiar with the matter, as it pushes ahead with plans to pursue the world’s biggest share sale.

The boutique investment bank had been shortlisted along with Evercore Partners Inc. as a potential adviser for the deal, people familiar with the matter said last month. Aramco, as the company is known, was seeking a bank to help it select underwriters for the sale, make decisions on potential listing venues and ensure the IPO goes smoothly, the people said at the time.

The mandate is a coup for New York-based Moelis, a firm founded in 2007 by former UBS Group AG dealmaker Ken Moelis. While the bank has advised on other large deals in the Middle East, such as the $25 billion debt restructuring of Dubai World LLC, this listing is its biggest ever role.

“Transactions of this magnitude clearly elevate the perception of the brand,” Devin Ryan, an analyst at JMP Securities, said in a note to clients. “Publicity from a high-profile win represents great advertising for Moelis, which can have tangible benefits, as success often begets more success.”

Moelis jumped 5 percent to $36.75 at 9:40 a.m. in New York, extending its gain in the past 12 months to 48 percent. The company sold stock for $25 a share in its 2014 initial public offering. Ryan, who has an outperform rating on Moelis, said its reasonable to estimate a fee for the Aramco deal could be “in the tens of millions of dollars.”

The Aramco IPO, which is predicted to raise about $100 billion, would also push Moelis up in global investment bank rankings. The company ranked 28th in mergers and acquisitions announced last year, according to data compiled by Bloomberg.

Representatives for Moelis and Aramco declined to comment. Moelis is scheduled to report fourth-quarter earnings Wednesday after the close of trading in U.S. markets. The Financial Times had previously reported that Moelis won the advisory role.

Record IPO

Saudi Arabia is aiming to sell less than 5 percent of the company as part of a plan by Deputy Crown Prince Mohammed bin Salman to set up the world’s biggest sovereign wealth fund and reduce the economy’s reliance on hydrocarbons. The IPO would be the largest ever, dwarfing the $25 billion raised by Chinese Internet retailer Alibaba Group Holding Ltd. in 2014.

For more on Aramco’s IPO, read this QuickTake

Aramco also recently asked banks including Goldman Sachs Group Inc. and HSBC Holdings Plc to pitch for advisory roles, people familiar with the matter said last month. The company plans to finish selecting banks later this year ahead of a listing in the second or third quarter of 2018, two of the people said.

JPMorgan Chase & Co. and Michael Klein, the former Citigroup Inc. investment banker who runs his own advisory firm, have already been selected to work on the IPO, people familiar with the matter said in April. Klein is providing strategic advice to the government, while JPMorgan is working on preparations for the IPO and may be among the banks that underwrite the listing, the people said.

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