August 20, 2019
A $100 Billion Mandate
Saudi Aramco has picked Lazard Ltd. and Moelis & Co. to advise on its second attempt at what could become the world’s largest initial public offering. The listing could raise about $100 billion, and Aramco is planning a stock-market debut as early as 2020, though no final decisions have been made. The boutique banks have already started preparatory work on the offering, according to people with knowledge of the matter. Their expected role includes helping select underwriters, weighing listing venues and working to support Aramco’s valuation expectations.
The market tension is clear: Aramco wants an IPO of historic scale, but it still has to convince investors, banks and exchanges that the valuation and structure can hold. That makes the advisory mandate more than a league-table headline. It is a test of whether boutique investment banks can shape the most politically sensitive and financially ambitious equity offering in the market. For investment banking recruiting, this is exactly the kind of transaction candidates should be able to discuss in interviews because it connects valuation, capital markets, sovereign strategy and bank selection.
Lazard’s selection is especially notable because it was not part of the original advisory group during Aramco’s first listing attempt. The earlier roster included Evercore, Moelis, HSBC, JPMorgan and Morgan Stanley. Lazard’s work on Aramco’s bond sale this year helped put the firm in position for the IPO mandate. That debt issuance allowed Aramco to borrow $12 billion at a lower yield than its sovereign parent, a meaningful signal of investor demand and credit quality.
Loyalty and Positioning Matter
The renewed IPO push also shows how relationship capital can matter as much as technical capability. Lazard had been pushing hard in recent weeks, sending senior dealmakers from London, Paris and Houston to meet Aramco officials in the Middle East. Moelis, meanwhile, had remained close to the process from the earlier effort. Ken Moelis was one of the few Western bank executives to attend Saudi Arabia’s signature investment summit in October 2018 after the killing of journalist Jamal Khashoggi.
Saudi Arabia appears inclined to reward banks that stayed engaged during a difficult period for the kingdom. That is an important lesson for bankers: mandates are often won long before a formal bakeoff, through persistence, access and credibility. The immediate market reaction was mixed but visible. Moelis shares rose 1.4% at 9:51 a.m. in New York trading after gaining as much as 4.1%, while Lazard shares fell 0.7% but remained up about 2.3% for the week after reports that it was likely to win a role.
The IPO was first announced in 2016 as a centerpiece of Saudi Arabia’s Vision 2030 plan to modernize the economy, with an original target of listing in the second half of 2018. Aramco later put the IPO plans on hold and moved instead to buy a $69 billion stake in Saudi Basic Industries Corp. The revival of the listing process suggests the strategic logic never disappeared. If anything, the selection of Lazard and Moelis shows that Aramco is rebuilding the process with advisers whose recent actions demonstrated commitment when the deal was uncertain.