PetroRabigh $1.2bn IPO four times oversubscribed

Saudi Arabia-based Rabigh Refining and Petrochemical Company (PetroRabigh) said on Monday its 4.6 billion riyals ($1.2 billion) initial public offering (IPO) was almost four times oversubscribed at its close last weekend.

The sale of the 25% stake in PetroRabigh - a joint venture between state firm Saudi Aramco, and Japan's Sumitomo Chemicals - is the first time Aramco, the world's largest oil producing firm, has offered shares in one of its affiliates to the public.

More than 5.4 million Saudi investors had offered 16.02 billion riyals by Saturday's close, the last subscription day, PetroRabigh said in a statement. Institutional investors offered at least 6.8 billion riyals, it added.

The companies offered 219 million shares, representing a 25% stake, to Saudi nationals at 21 riyals each, valuing PetroRabigh at $4.9 billion. This represents a steep discount to the $10 billion invested in the project by Aramco and Sumitomo Chemicals, in a bid to widen Saudi participation in the stock market.

Lead manager HSBC Saudi Arabia said institutional investors will get only a quarter of the total shares on offer instead of 50% if retail investors offered more than the sought 2.3 billion riyals.

Sumitomo and Aramco agreed in 2005 to develop the petrochemical complex through a 50-50 joint venture that would upgrade a refinery at Rabigh on the Red Sea coast.

Aramco will supply PetroRabigh with the feedstock necessary to operate the plant on a long-term, fixed-price basis and will market the refined products produced by PetroRabigh.

Sumitomo Chemicals will provide petrochemical international sales and marketing expertise, as well as technology licensing.

The joint venture is expected to start commercial operations in the fourth quarter. The complex will produce 18.4 million tonnes of oil products, 1.3 million tonnes of ethylene and 900,000 tonnes of propylene a year.

Sumitomo Chemicals and Aramco will each retain a 37.5% stake after the IPO.

PetroRabigh is the first of some 40 firms that plan to sell shares to the public in Saudi Arabia this year in offerings worth up to $8 billion, or twice last year's total, Hasan Al-Jabri, head of the investment banking arm of state-owned National Commercial Bank (NCB) said in November. (Reuters)

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