Saudi fund plans jumbo offering of telco stake

SAUDI ARABIA’S sovereign wealth fund is set for what could be the biggest secondary offering of the year in Europe, the Middle East and Africa as it looks to fund a huge investment program to diversify the oil-dependent economy.

The Public Investment Fund (PIF) plans to raise as much as $3.1 billion through the sale of shares in Saudi Telecom Co., offering a 5% stake in the Middle East’s most profitable mobile-phone operator, according to a statement to the stock exchange.

A total of 100 million shares in STC, as the company is known, will be offered at between 100 riyals ($26.70) to 116 riyals starting Dec. 5. The STC stake sale is set to eclipse the $2.8-billion share placement by Germany’s Siemens Healthineers AG in March, data compiled by Bloomberg show.

STC’s shares are offered at a discount to Sunday’s closing price of 116.20 riyals. The stock has climbed over 6% this year, compared with the 28% gain in the Tadawul All Share Index. It traded almost 4% lower at 11 a.m. in Riyadh.

Saudi Arabia’s sovereign wealth fund is one of the main vehicles for Crown Prince Mohammed Bin Salman’s plans to diversify the Saudi economy away from oil. It’s previously said it would invest about $40 billion in the domestic economy a year until 2025.

NOT FOREVER
The crown prince said earlier this year that the wealth fund shouldn’t hold on to all of its investments “forever,” as he looks to pare down holdings and limit the ownership in some companies to a minority stake. “So if you own 70% of a company then that’s wrong — PIF would own 30% of that company and they will sell that 40%,” he said at the time.

The fund has borrowed money, sold off assets and received cash infusions from the government as it looks for ways to pay for its new investments. The PIF also says it uses money generated from existing investments to fund new deals.

The share sale was planned as early as September when the fund said it had hired a group of banks including Goldman Sachs Group, Inc., HSBC Holdings Plc and Morgan Stanley to manage the sale of part of its 70% stake in STC.

Goldman Sachs, HSBC, Morgan Stanley and SNB Capital are the joint financial advisers and global coordinators with Citigroup, Inc. and Credit Suisse Group AG. The Saudi financial institution will also be the lead manager. — Bloomberg