RIYADH, (Reuters) – Saudi Arabia’s Rabigh Refining and Petrochemical Company (PetroRabigh) launched on Saturday an initial public offering to raise 4.6 billion riyals ($1.23 billion), kicking off a busy IPO agenda this year.
PetroRabigh, a $10 billion joint venture between Saudi Aramco and Japan’s Sumitomo Chemicals, will sell 219 million shares, representing 25 percent of its capital, to Saudi nationals at 21 riyals each, lead manager HSBC Saudi Arabia said.
This is the first time that state-owned Aramco, the world’s largest oil producing firm, has offered shares in one of its affiliates to the public.
“It signals that Aramco is looking to allow the broader public to participate in the growth of their activities in the kingdom,” Timothy Gray, HSBC Saudi Arabia’s Managing Director, told Reuters.
“It will be quite interesting. It’s a unique opportunity for the public,” he said.
He declined to say if Aramco planned to offer shares in existing or future affiliates to the public.
The joint venture is the first of some 40 firms that plan to sell shares to the public in Saudi Arabia in 2008, in offerings worth up to $8 billion, or twice last year’s total, Hasan al-Jabri, head of the investment banking arm of state-owned National Commercial Bank (NCB) said in November.
The share price offers a 50 percent discount on the project’s cost of $10 billion, according to Reuters calculations.
The valuation was based on government policy to have broader public participation, Gray said.
Sumitomo and state-owned Aramco, the world’s largest oil company by output, agreed in 2005 to develop the petrochemical complex through a 50-50 joint venture that would upgrade a refinery at Rabigh on the Red Sea coast.
Aramco said in 2006 the IPO would take place after operations began in 2008. Sumitomo was against selling shares before production started, scuppering an initial IPO plan in 2006.
Aramco officials argued an early share sale would raise cash and help offset rising project costs. Soaring material and construction prices have more than doubled the project’s cost from an initial estimate of $4.3 billion.
The joint venture is expected to start commercial operations in the fourth quarter of 2008.
The complex will produce 18.4 million tonnes of oil products, 1.3 million tonnes of ethylene and 900,000 tonnes of propylene a year.
Sumitomo Chemicals and Aramco will each retain a 37.5 percent stake after the IPO, Sumitomo Chemicals said in a statement in Tokyo.
All Saudi banks will take subscriptions for the IPO from January 5-12, Gray said. The issue is only open to Saudis.
Institutional investors will get between 25 and 50 percent of the offered shares depending on appetite for the retail tranche, Gray said. Up to 1.78 million shares will be earmarked for employees, he added.
The minimum subscription is for 10 shares and the maximum is one million shares. HSBC Saudi Arabia is a unit HSBC.