Saudi Aramco picks US bank Moelis as adviser for biggest ever IPO

Oil giant is expected to raise approximately $100bn at its initial public offering, as it prepares to sell a 5% stake.

Saudi Arabia plans Aramco listing in London, Hong Kong, and New York — Saudi Aramco, which is estimated to be worth about $2.5trn, will sell only 5% of its equity Reuters

Oil giant Saudi Aramco has appointed global investment bank Moelis & Co. to work on its stock market flotation, which is expected to be the biggest listing in history.

According to the Financial Times, the New York-based bank saw off a number of rivals to secure the appointment, given a host of banks had sought to work on the company's initial public offering (IPO), which is expected to raise $100bn (£80bn).

The share sale, which Saudi Arabian government's officials hope will value the company at around $2trn (£1.6trn), will comfortably dwarf Alibaba's IPO, which saw the Chinese internet retailer raise $25bn in January 2015.

It is understood Aramco was looking for a bank that would make decisions on potential listing venues, select underwriters for the sale and ensure the IPO process is as smooth as possible. The shares will be listed in the Saudi capital Riyadh, but given the country's stock market is too small to absorb such a huge flotation, Aramco is considering listing its shares in London, New York and Hong Kong as well.

Aramco's IPO would be by far Moelis' biggest ever deal. The bank, which was founded in 2007 by former UBS Group dealmaker Ken Moelis, has acted as an adviser on a number of large deals in the Middle East, such as the $25bn debt restructuring of asset manager Dubai World.

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

The decision to sell 5% of the company, is part of Deputy Crown Prince Mohammed bin Salman's Saudi Vision 2030 plan.

The strategy aims to create the world's biggest sovereign wealth fund and reduce Saudi Arabia's historic reliance on hydrocarbons. The country's economic fortunes are closely linked to oil prices, which have swung wildly in recent years. In January last year, the price of a barrel of crude tumbled to a near 13-year low of $26, having been as high as $112 in June 2014, before rebounding to the current 55%.

Aramco alone pumps over 10 million barrels of oil per day, amounting to around one-ninth of the world's total supply, but the increasing shift away from oil consumption and onto renewable resources could have serious implications for the company.