Saudi Arabia recently paid around $50 million of extra fees to banks on the record-breaking listing of state oil company Aramco, with most of the cash going to local underwriters after Wall Street firms were sidelined, people familiar with the matter said.
The discretionary incentive fee — doled out to reward banks for the amount of orders they brought in — was transferred to arrangers of the 2019 share sale in the last couple months, according to the people. The payments totalled about 0.25% of the money raised from institutional investors, the people said, asking not to be identified because the information is private.
The additional money brings the sum that the kingdom paid to the banks on the $29.4 billion initial public offering to just over $100 million, a tiny figure sum by global standards. T-Mobile US Inc. paid roughly twice that amount last year for a share sale that was about half the size of the Aramco offering, according to data compiled by Bloomberg.
It wasn’t immediately clear why it took Saudi Arabia so long after the IPO to pay the final fees. Aramco declined to comment.
Saudi Arabia initially paid a combined $64 million in base fees to the IPO arrangers, with the top foreign banks on the deal getting about 13 million riyals ($3.5 million) each, Bloomberg News reported earlier. The kingdom didn’t need the Wall Street firms’ international networks after it scrapped roadshows outside the Middle East, turning instead to local retail buyers and wealthy families to shore up the deal.
The world’s biggest investment banks spent several years building up their Saudi presence in the hopes of winning a role on the Aramco IPO, which Crown Prince Mohammed Bin Salman had said would value the company at $2 trillion. In the end, he had to make do with a valuation of $1.7 trillion, while international investment banks including Goldman Sachs Group Inc. and JPMorgan Chase & Co. were relegated to minor roles on the deal after puncturing the prince’s valuation hopes.
NCB Capital, Samba Financial Group and HSBC Holdings Plc’s local unit led the IPO process after that, with other Saudi banks also helping bring in orders from domestic investors.