Aramco expecting to raise USD1 billion in base oil unit IPO
Saudi Arabia’s Capital Market Authority has approved plans for Saudi Aramco Base Oil Company (Luberef) to offer 29.7% of its share capital to the public through an initial public offering (IPO) and listing of its shares on the Main Market of the Saudi Exchange.
Luberef operates base oil refineries in Jeddah (275,000 metric tons per year of Group I base oils) and Yanbu (1 million metric tons per year of Group I and Group II base oils). Currently, Saudi Arabian OIl Company (Saudi Aramco) owns 70% of Luberef, while Jadwa Investment owns 30%. Jadwa Investment, headquartered in Riyadh, Saudi Arabia, is an investment management and advisory firm in Saudi Arabia and the wider region.
The offering consists of Jadwa’s sale of its shares in Luberef. Jadwa Investment acquired its stake in Luberef in 2007 when ExxonMobil disposed of its Mobil legacy holding in Luberef. Exxon acquired Mobil in 1999.
Shares will be offered to both individual and institutional investors (including institutional investors outside the United States).
The company has hired SNB Capital, the investment banking and asset management arm of the Saudi National Bank based in Riyadh, Saudi Arabia, as lead manager, and Citigroup, HSBC and Morgan Stanley as financial advisers, book runners, global coordinators and underwriters.
The bidding period and book building opens on December 4. Subscription period for individual investors opens December 14. The announcement of the final allocation of the offer will be made no later than December 22.
The price at which all subscribers will purchase the shares will be determined after the book-building period. According to media reports, Saudi Aramco expects to raise at least USD1 billion in the Luberef IPO.
Luberef reported record sales in 2021 of SAR8.85 billion (USD2.36 billion) compared to SAR4.4 billion (USD1.17 billion) the previous year, as crude oil prices started to rise following Russia’s invasion of Ukraine. With a base oil crack margin—the difference between base oil and feedstock prices— of USD599 per metric ton in 2021, Luberef reported bumper profits of SAR1.5 billion (USD400 million) in 2021, compared to SAR81 million (USD21.6 million) the previous year.
Luberef is forecasting demand for base oils to grow by about five million metric tons globally between 2022 and 2030.
“The demand outlook for base oils is further supported by strong macro fundamentals in Saudi Arabia and the broader Middle East region, which are key end markets for Luberef,” said Luberef President and CEO Tareq Alnuaim.