In what will be the biggest victory in the brief history of Ken Moelis' relatively new New York-based independent investment bank, Moelis & Co., moments ago the FT has reported that Moelis has won the advisory mandate for the planned IPO of Saudi Aramco.
As the FT notes, "winning the hotly contested mandate represents a coup for the boutique investment bank, which was founded by Ken Moelis in the midst of the financial crisis in 2007." As for the potential for advisory fees, they are - in a word - huge: the Saudis hope to turn the state-owned oil group into the world’s biggest, most valuable publicly traded company, with a valuation of about $2tn. As the FT also adds, citing people close to the IPO planning process, the sale of a 5% stake should happen next year, although the number of shares sold could increase, although depending on the price of oil, the timing could slip.
A quick recap on the strategy behind the Saudi plan to take the company public:
Saudi Aramco’s IPO is part of a transformation plan, envisaged by Saudi Arabia’s power broker deputy crown prince, Mohammed bin Salman, which seeks broad-based privatisation to boost employment and diversify the kingdom away from oil. Prince Mohammed believes the privatisation could value Saudi Aramco at $2tn.
A successful flotation aims to use the IPO proceeds for investments in non-oil industries in order to wean the country off its most precious resource.
Banks, advisory firms and consultancies have scrambled to secure work on the IPO since Saudi officials announced their intention a year ago. JPMorgan, which has been Saudi Aramco’s commercial banker for years, and Michael Klein, a former star Citigroup banker, are working with the Saudi authorities on a broad range of matters including the IPO.
It was not immediately clear was the fee structure granted to Moelis will be, but even a sizable haircut on traditional advisory fee assignments will be a huge windfall for the investment bank.