Saudi Arabia set to raise $11.2 bln in Aramco share offer priced at lower end of range

Saudi Arabia is poised to raise more than $11.2 billion from its secondary offering of oil giant Aramco's shares, after pricing them towards the lower end of a price range at 27.25 riyals ($7.27), people familiar with the matter told news agency Reuters on Friday.

Aramco's book was covered four to five times near the bottom of the price range of 26.7 to 29 riyals, one of the people said.

Aramco did not immediately give a comment. The Saudi government communications office did not immediately respond either.

Foreign investment, which has repeatedly missed targets, is a key plank of Saudi de facto ruler Crown Prince Mohammed bin Salman's plan to diversify the economy away from oil.

The offering is a fresh test of the kingdom's ability to attract overseas cash, though it was not immediately clear to what extent the share sale whet international investor appetite.

The plan, dubbed Vision 2030, has poured tens of billions of dollars into projects as varied as electric vehicles and futuristic cities in the desert, mainly via the Public Investment Fund (PIF).

Sources and analysts have said the PIF is likely to be a beneficiary of the share sale proceeds, though some have suggested the funds may also partly plug the kingdom's likely budget deficit this year.

The pricing is a nearly 4% discount to where Aramco's shares closed on Thursday and gives Aramco a valuation of about $1.76 trillion. Its market capitalisation, according to its Thursday share price, was about $1.83 trillion.

The Saudi government is selling a roughly 0.64% stake in Aramco. The offering could then be boosted to 0.7% of the oil giant in a so-called greenshoe option, which allows bankers to use shares to stabilise the price of the offering.

If that option is exercised, Aramco would raise roughly $12.36 billion. The world's top oil exporter exercised a greenshoe option after its 2019 initial public offering (IPO) to raise $29.4 billion, which remains the world's largest IPO.

The banks on the deal took orders through Thursday and shares are set to start trading next Sunday on Riyadh's Saudi Exchange.

The offering is codenamed Project Bond and has been in the works for months as a key step in drawing a broader range of investors after Aramco's record-breaking IPO, sources have said.

The deal will be a test of interest in Saudi markets after lukewarm demand from international investors for that IPO amid concerns about a high valuation, Saudi government control and the energy transition away from hydrocarbons. ($1 = 3.7504 riyals)