Saudi Arabia's government has initiated the process of selling a new stake in the state oil giant Aramco, aiming to raise up to $13.1 billion. This landmark deal is crucial in supporting the kingdom's economic diversification plan.

The main component of the deal involves the potential raising of $12 billion through the offering of roughly 1.545 billion Aramco shares, representing approximately 0.64% of the company. This is based on a pricing range of 26.7 ($7.12) to 29 riyals, as detailed in Aramco's filing on Riyadh's Saudi Exchange. With the inclusion of a so-called greenshoe option, which allows the sale of nearly 1.7 billion shares (0.7% stake), the deal's value could reach $13.1 billion at the upper end. This option empowers bankers to utilize shares for stabilizing the offering's price.

Aramco's CEO, Amin Nasser, pointed out that the offering presents an opportunity to expand the shareholder base among both Saudi and international investors, in addition to enhancing liquidity and increasing global index weighting.

This offering marks the culmination of a prolonged endeavor to sell another portion of one of the world's most valuable companies following its record-setting IPO in 2019, which raised $29.4 billion. Approximately 10% of the latest offering will be earmarked for retail investors, contingent on demand.

Sources revealed that the offering could take place as early as June. This new deal is set to enable the kingdom to finance significant domestic projects linked to economic diversification, as highlighted by Hasan Alhasan, a senior fellow at the International Institute for Strategic Studies.

In light of missing its foreign direct investment target and with an anticipated budget deficit of up to $21 billion, Saudi Arabia is resorting to the sale of Aramco equity and debt issuances. The kingdom is likely to continue reallocating capital to various sectors such as renewable energy, technology, tourism, logistics, and manufacturing, envisioning them as sources of long-term economic growth.

On Thursday, Aramco shares closed 0.17% lower at 29.1 riyals ($7.76), resulting in a market capitalization of approximately $1.87 trillion. Despite a drop in profits by nearly a quarter, the company boosted dividends to nearly $98 billion in 2023 from the previous $75 billion, with an expected outlay of $124.3 billion this year. Furthermore, Aramco has made strategic investments in refineries and petrochemical projects, expanded its retail and trading businesses, and heightened its focus on gas, including its initial venture into liquefied natural gas abroad last year.

The deal is being facilitated by prominent financial institutions such as Morgan Stanley, Citi, Goldman Sachs, HSBC, Saudi National Bank, Bank of America, JPMorgan, along with local banks Al Rajhi Capital, Riyad Capital, and Saudi Fransi Capital, acting as joint global coordinators and joint bookrunners.

In comparison to Aramco's 2019 IPO, the current deal involves approximately half the number of banks participating.