Saudi Aramco’s refining unit proceeds with 29.7% Tadawul IPO plan

Aramco will continue to own 70% of Luberef’s share capital after the offering

Saudi oil giant Aramco's base oil subsidiary, Luberef, announced its intention to proceed with an IPO on Tadawul's main market. Reuters

Saudi Aramco Base Oil Company (Luberef), the refining unit of oil major Saudi Aramco, said it plans to proceed with an initial public offering, as the world’s biggest crude producer seeks to list some of its subsidiaries.

Luberef will sell 50 million shares, or 29.7 per cent of the company's issued share capital, through the IPO on the main market of Saudi Arabia's Tadawul stock exchange, the company said in a statement on Sunday.

The company is selling existing shares owned by Jadwa Industrial Investment Company.

"Luberef’s IPO supports its growth ambitions and is expected to strengthen its already competitive business and unlock new opportunities for its stakeholders," said Tareq Alnuaim, president and chief executive of Luberef.

"Luberef will continue focusing on achieving growth in key end markets, especially where market dynamics present attractive demand outlooks.”

The intention to float comes after Luberef on Thursday received approval from Saudi Arabia's stock market regulator, the Capital Market Authority, for the IPO.

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

Oil giant 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, according to the statement.

The final pricing of the shares offered will be determined at the end of the book-building period, it said.

The shares are open for subscription by institutional, individual and qualified foreign investors. A maximum of 12.5 million shares, or 25 per cent of the total share offering, will be allocated to individual investors, the company said.

Established in 1976, Luberef currently operates two production facilities located on the west coast of the kingdom in Yanbu and Jeddah with a combined capacity to produce 1.3 million metric tonnes per year 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 for 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, other countries across the Middle East, North Africa and India, it said. Its products are also sold across Asia, the Americas and Europe.

Luberef's revenue in 2021 reached 8.8 billion Saudi riyals ($2.4 billion). Its profits before interest, tax, depreciation and amortisation in 2021 stood at 2.1 billion riyals.

Last year, the company distributed about 938 million riyals in dividends.

"Luberef’s listing on the main market of the Saudi Exchange adds an important strategic dimension to the company’s growth strategy, while facilitating our vision to be the leading supplier of premium base oils and speciality products," said Ibrahim Al Buainain, chairman of Luberef.

Demand for base oils is expected to grow at a compound annual rate of 3.5 per cent and 4.8 per cent between 2022 and 2030, the company said in the statement.

"The demand outlook for base oils is further supported by strong macro fundamentals in Saudi Arabia and the broader Middle East region, which are key end markets for Luberef," it said.

Luberef has appointed SNB Capital as the lead manager on the offering.

SNB Capital, HSBC, Citigroup and Morgan Stanley are joint financial advisers, bookrunners, global co-ordinators and underwriters of the deal.