Saudi Arabia's sovereign fund raises $3.2bn from sale of STC stake

Saudi Arabia’s Public Investment Fund raised $3.2 billion from the sale of a 6 per cent stake in Saudi Telecom Company, the country's largest mobile operator, through a secondary share offering.

The kingdom’s sovereign wealth fund sold 120 million shares to local, international institutional and retail investors at 100 riyals per share, it said in a joint statement with STC. The number of shares sold was revised from 100.2 million.

The secondary public offering, the first of its kind in the Saudi Capital Market, is the largest equity capital markets transaction in the kingdom since the IPO of Saudi Aramco.

It is also the largest secondary follow-on transaction in Europe, the Middle East and Africa in the past three years, and the largest secondary follow-on transaction in Central and Eastern Europe, the Middle East and Africa in about 10 years.

The $430 billion sovereign wealth fund retains a 64 per cent stake in STC's issued shares after the offering. The free float of the telecoms operator has increased to 29.84 per cent.

“The strong interest that this offering has generated from domestic and international investors is testament to STC’s enduring strengths and exciting prospects for the future," said Yazeed Al-Humied, PIF deputy governor and head of Mena investments.

“This transaction is in line with PIF’s strategy 2021-2025 ... to recycle capital by selling stakes in the companies owned by PIF, as with the secondary public offering of PIF’s shares in STC and the [initial public offerings] of Acwa Power and Saudi Tadawul Group, to reinvest the proceeds in emerging and promising sectors in the local economy."

The PIF is a central plank of the kingdom's Vision 2030 initiative that seeks to diversify the Arab world's largest economy and reduce its reliance on oil.

Under a five-year strategy that was announced in January, the fund aims to more than double the value of its assets under management to $1.07 trillion and to commit $40bn annually to develop the domestic economy until 2025.

The PIF is diversifying its investment portfolio and boosting the kingdom’s economic growth by taking advantage of new opportunities amid the coronavirus pandemic.

The value of the fund's US stock holdings nearly tripled to more than $43bn in the third quarter as it invested in a variety of companies from e-commerce and FinTech to biotechnology and fuel cell-powered commercial vehicles.

“We are extremely pleased to see the strong interest in the offering from domestic and international investors ... the increase in the company’s free float percentage ... will further enhance the company’s international investment case and help make its shares accessible to a wider range of investors and improve trading liquidity,” said STC group chief executive Olayan Alwetaid.

As part of the kingdom's privatisation plans, STC raised $9.6bn from the sale of 30 per cent of its shares in a public offering in 2003.

SNB Capital acted as the lead manager. Goldman Sachs, HSBC, Morgan Stanley, SNB Capital, Citigroup and Credit Suisse were joint bookrunners to STC and the PIF.