Luberef IPO: Saudi Aramco’s refining unit set to raise $1.32bn from offering

Company offering includes a 29.7% stake sale and listing on the Tadawul exchange

Saudi Aramco engineers at plant in Hawiyah, Saudi Arabia. Luberef, the state oil company's refining unit, will list on the kingdom's Tadawul market. AP

Saudi Aramco Base Oil Company, better known as Luberef, is set to raise more than 4.95 billion riyals ($1.32 billion) from its initial public offering after choosing the higher range of its offer share price.

The refining unit of oil company Saudi Aramco sold more than 50 million shares, or about 29.7 per cent of the company's issued share capital, with the IPO drawing strong demand from investors in the kingdom and internationally.

The institutional portion of the offering was 29.5 times oversubscribed, generating institutional order book of around 146.4 billion riyals, the company said in a statement on Sunday.

Luberef set the final share price at the higher end of the offering range at 99 riyals a share, implying a market capitalisation of 16.71 billion riyals at listing, it said.

“We are delighted that Luberef’s offering has been met with substantial interest from both local and international institutional investors," Tareq Alnuaim, president and chief executive of Luberef, said. "It is a testament to the investors’ confidence in our company, our growth strategy and the prospects for our industry.”

The subscription period for individual investors is set to open for five days, from December 14 until December 18. A maximum of 12.5 million shares, or quarter of the total share offering, will be allocated to individual investors.

Luberef is selling existing shares owned by private equity company Jadwa Investment. It will list on the main market of Saudi Arabia's Tadawul stock exchange.

Saudi Aramco owns 70 per cent of Luberef and Jadwa owns the remaining 30 per cent, which it acquired in 2007 from Exxon Mobil.

Aramco will not sell any of its shares in the offering and will continue to own 70 per cent of Luberef’s share capital after the offering. No date has been set yet for shares to begin trading on the Tadawul exchange.

Luberef's IPO plans come amid a bumper year for company listings in the Gulf and Mena regions, despite declines in global markets, with Saudi Arabia and the UAE making up the majority of new listings amid high oil prices.

Middle East IPOs have raised more than $19 billion this year, the highest share for the Gulf region after 2019, when Saudi Aramco went public in a $29 billion offering, the world’s largest.

Last month, Americana, the largest quick-service restaurant operator in the Mena region, raised $1.8 billion from its IPO, paving the way for its listing on the Tadawul bourse and the Abu Dhabi Securities Exchange, the Arab world's two largest stock markets.

Americana is Saudi Arabia's largest IPO this year and the first company to be dually listed in the kingdom and the UAE.

Luberef is Saudi Arabia's third largest IPO this year after Americana and Nahdi Medical, the kingdom's biggest pharmacy chain, which raised $1.36 billion.

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  In November 2022, FTSE Russell updated the investability weightings of Saudi Tadawul Group, the holding company that owns and operates the kingdom's stock exchange, on its indices that include the FTSE All-World Index, the FTSE Global Mid Cap Index and the FTSE Emerging Index. AFP

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  A view of the exchange board at the Stock Exchange Market (Tadawul) bourse in Riyadh displaying Aramco shares. AFP

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  An investor looks at a screen of asset prices at the Tadawul exchange in Saudi Arabia. AFP

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  A man walks past the Tadawul sign in Saudi Arabia. Reuters

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  Middle East IPOs have raised about $21 billion in 2022. AFP

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  Investors are seen at the Tadawul stock exchange in Saudi Arabia. AP

Established in 1976, Luberef currently operates two production plants on the west coast of the kingdom, in Yanbu and Jeddah, with a combined annual production capacity of 1.3 million metric tonnes of base oils, according to its website.

The Aramco unit makes base oils used in lubricants for motor vehicles, ships and industrial machinery.

Base oils are used across various sectors where hydraulic, turbine and transmission fluids are required in production and manufacturing machinery, such as in the steel industry, food production, textiles and clothing.

Luberef’s products are sold mainly in the company’s key end markets, including Saudi Arabia and other countries across the Mena region, Asia, the Americas and Europe, it said.

SNB Capital, HSBC, Citigroup and Morgan Stanley are acting as joint financial advisers, bookrunners, global co-ordinators and underwriters. In addition, SNB Capital is also acting as lead manager on the IPO.