Wall Street returns to Saudi Arabia as biggest deals entice CEOs

Saudi Arabia has been home to some of the world's hottest deals this year, as Europe and Asia have languished
Wall Street returns to Saudi Arabia as biggest deals entice CEOs
JPMorgan Chase & Co., Morgan Stanley, HSBC, Citigroup and Goldman Sachs Group this month helped Saudi Aramco raise $12 billion of bonds in one of the most oversubscribed debt offerings in history.
By Bloomberg
Wed 24 Apr 2019 11:52 AM

Some of the world’s leading financiers are returning to Saudi Arabia after the oil-rich kingdom yielded some of the year’s biggest merger and bond deals.

The arrival of top banking executives in Riyadh puts the finishing touches on a six-month charm offensive after their initial protests over the murder of government critic Jamal Khashoggi.

HSBC Holdings’ CEO John Flint and BlackRock’s Larry Fink, who skipped a gathering of elites in the Saudi capital in the aftermath of the killing, are among speakers at a two-day financial conference starting Wednesday.

“The pressures not to attend seem to be a lot less this year,” said Paul Sullivan, a Middle East expert at Georgetown University’s Center for Security Studies.

Khashoggi was murdered in October after entering the Saudi Consulate in Istanbul. Questions have centred on whether Crown Prince Mohammed bin Salman knew about or ordered the killing, a possibility US intelligence agencies consider likely, and whether the Trump administration would be willing to sacrifice its strategic partnership with Saudi Arabia to hold him accountable.

While the US has blacklisted 16 Saudi nationals for their role in the killing, the diplomatic crisis for business has proved to be little more than a blip. A 40 percent increase in oil prices since the start of the year has helped too.

Hottest deals

Saudi Arabia has been home to some of the world’s hottest deals this year, as Europe and Asia have languished. JPMorgan Chase & Co., Morgan Stanley, HSBC, Citigroup and Goldman Sachs Group this month helped Saudi Aramco raise $12 billion of bonds in one of the most oversubscribed debt offerings in history.

Morgan Stanley and JPMorgan are also advising the oil firm on its $69 billion acquisition of local chemical giant Sabic. Spokesmen for Morgan Stanley, JPMorgan, HSBC and BlackRock all declined to comment.

JPMorgan’s Jamie Dimon, who also pulled out of last year’s meeting, will be represented by co-president Daniel Pinto, while Clare Woodman, Morgan Stanley’s head of Europe, the Middle East and Africa, will also address the gathering of Saudi government officials, business heads and international bankers.

The boycott of the October summit was one of the industry’s most visible protests to Khashoggi’s murder, but money managers have been signaling plans to put it behind them ever since. “There is not any community in the world that is perfect. There are many extremes in every community,” BlackRock’s Fink said in an interview with CNBC last week. JPMorgan’s Dimon said shortly after the conference that skipping the event accomplished "nothing."

Promising environment

Goldman Sachs’ David Solomon this month made his first trip to Riyadh as CEO, the first head of a global US bank known to have travelled to the country since Khashoggi’s murder. Inside Goldman Sachs, senior executives have indicated Saudi Arabia offers a more promising environment for growing the investment bank’s business than other parts of the Middle East, according to one senior banker at the US bank.

“Saudi Arabia remains one of the wealthiest countries in the world with one of the world’s largest sources of energy reserves, which helps explain the huge interest in Saudi Aramco’s recent bond issuance,” said Emily Hawthorne, Middle East and North Africa analyst at Texas-based advisory firm Stratfor Enterprises.

FDI struggle

Still, the hype over Saudi deals masks a struggle to attract long-term foreign direct investments crucial to reduce the reliance on oil. While FDI more than doubled last year to about $3 billion, it remains well below the average level of the past decade. That’s in part due to uncertainty over the crown prince’s economic plans and his 2017 declared crackdown on corruption, which ensnared hundreds of the country’s billionaires and businessmen.

Not all investors are ready to forgive and forget. Hedge fund Pharo Management (UK) LLP is said to have returned $300 million to the Saudi central bank in December.

Talent agency Endeavor also sought to terminate a deal to sell a $400 million stake to the kingdom’s Public Investment Fund and Milan’s La Scala opera house rejected a 15 million-euro donation ($17 million).

Other global executives attending Saudi Arabia’s Financial Sector Conference include:

  • Martin Gilbert, vice chairman at Standard Life Aberdeen
  • Luke Ellis, CEO of Man Group
  • Ken Moelis, Chairman of Moelis
  • Tom Finke, Chairman and CEO of Barings
  • Frederic Oudea, CEO of Societe Generale
  • Nobuyuki Hirano, Chairman of Mitsubishi UFJ
  • David Harding, CEO of Winton
  • Simon Cooper, CEO corporate and institutional banking at Standard Chartered
  • Jay Collins, vice chairman corporate and investment banking at Citigroup
  • Hooi Ling Tan, co-founder of Grab
  • David Schwimmer, CEO of London Stock Exchange

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