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A substantial payday awaits the three banks that will underwrite Saudi Aramco's IPO, but diverging estimates of the company's value could reduce the fees for underwriting the offering of the world's largest oil exporter.
The nationalized energy giant, which owns the vast energy operations and oil reserves Saudi Arabia's economy is built on, is valued at $2 trillion by a government estimate. If that figure holds up, and about 5% of the company is offered to the public, lead underwriters JPMorgan Chase & Co., Morgan Stanley and HSBC Bank could rake in more than $500 million in underwriter fees combined, based on an underwriter fee of 1% of the aggregate offering amount.
The amount would dwarf underwriter compensation from the largest global energy IPOs over the last 25 years, according to data compiled by S&P Capital IQ, and could approach a record across any industry set in 2008 when the banks in Visa Inc.'s IPO received about $550 million in total fees.
By comparison, fees from the top five global energy IPOs in the period garnered about $558 million combined, including $138 million in the 2006 offering of Russia's Rosneft Oil Company.
Saudi Arabia plans to float 5% of total ownership of the company, resulting...