Saudi sale of the century lures foreign investment banks, PE firms

One of the world’s largest privatization programs is drawing foreign investment banks and private equity (PE) firms to Saudi Arabia.
KKR is among the US-based PE firms joining regional companies such as Abu Dhabi’s Gulf Capital in the search for opportunities from the government’s plan to sell off around $200 billion in assets on top of a stake in oil giant Saudi Aramco.
Banks are also beefing up their operations. Citigroup obtained a Saudi investment-banking license last month and Goldman Sachs is looking into obtaining a Saudi equities license. Credit Suisse intends to apply for a full banking license and JPMorgan is adding bankers.
“We see a lot more opportunities in Saudi Arabia because for the first time the government is looking to partner with firms like ourselves and others,” said Kaveh Samie, who heads the Middle East and North Africa (MENA) region for KKR.
For decades, many foreign financial companies kept a minimal presence in Riyadh or shunned it entirely. They chased business related to Saudi Arabia’s investment of billions of petrodollars abroad but saw few opportunities in the Saudi domestic economy. But the mood has begun changing since last year’s announcement of a privatization drive to help the economy diversify in an era of low oil prices. A vast range of assets will be offered via methods ranging from public offers of shares to PE deals.
Mohammad Al-Tuwaijri, deputy ministry of economy and planning, told Reuters last month that Riyadh aimed to raise around $200 billion over several years — not including an expected tens of billions of dollars for the Saudi Aramco stake.
Karim El Solh, chief executive of Abu Dhabi’s Gulf Capital, said it had become more proactive seeking Saudi investments and its pipeline of potential deals had grown in three years.
JPMorgan, which has around 70 bankers in Saudi Arabia, is adding about 10 across its investment banking, equities and custody businesses.
“With economic transformation comes a need for transactional services, capital markets access and advice,” said Sjoerd Leenart, JPMorgan’s head of Middle East, Africa and Turkey.
HSBC has made staffing changes to help its Saudi business, including the secondment last month of Samer Deghaili, co-head of equity capital markets in the region, to its Saudi subsidiary.
“Saudi Arabia will probably be a volumes market given the depth of the economy. Plus being the largest economy in the Gulf Cooperation Council (GCC), it is not one we can ignore,” said Aasim Qureshi, managing director at QNB Capital, the investment-banking arm of Qatar National Bank (QNB).
QNB said this month it plans to apply for a Saudi license for its investment bank.
Many PE firms think there are bound to be lucrative deals given the wide range of sectors which Saudi Arabia’s economic reforms aim to develop, including tourism, entertainment and auto manufacturing.
“It is exactly the same kind of transformation that China and India went through,” said Iqbal Khan, chief executive at Dubai’s Fajr Capital. “We see this as a very big opportunity.”

Source: Arab News