Aramco to go public in giant IPO
SAUDI Aramco yesterday announced its long-awaited stock market debut in what could be the world’s biggest IPO, underpinning Saudi’s Crown Prince Mohammed bin Salman’s ambitions to overhaul the kingdom’s oil-reliant economy.
After years of delay, Aramco said it plans to sell an unspecified number of shares on the Riyadh stock exchange, calling it a “historic” milestone for the energy giant which pumps 10 percent of the world’s oil.
However, the state firm said there were no current plans for an international listing, indicating that the long-discussed goal for a two-stage IPO including an offering on a foreign bourse had been put aside.
The market launch of the world’s most profitable company forms the linchpin of Prince Mohammed’s ambitious plans to overhaul the oil-reliant economy, with tens of billions of dollars needed to fund megaprojects and new industries.
With analysts saying that Aramco could be valued at up to US$1.7 trillion, the initial public offering is potentially the world’s biggest, depending on how much of the company it decides to sell.
“Today marks a significant milestone in the history of the company and important progress toward delivering Saudi Vision 2030, the kingdom’s blueprint for sustained economic diversification and growth,” Aramco chairman Yasir al-Rumayyan said.
“Since its formation, Saudi Aramco has become critical to global energy supply.”
The final offer price and the number of shares to be sold “will be determined at the end of the book-building period,” said the firm, which is headquartered in the eastern city of Dhahran.
Aramco had initially been expected to sell a total of 5 percent on two exchanges, with the first listing of 2 percent on the Tadawul Saudi bourse followed by a three percent listing on an overseas exchange.
But amid reports that it was struggling to get big institutional investors on board, Rumayyan indicated that the highly anticipated plans for the second stage had been put aside.
“For the (international) listing part, we will let you know in due course. So far it’s only on Tadawul,” he told a press conference.
However, the company said the Riyadh offering was open to institutional investors as well as Saudi individuals, foreigners resident in the kingdom and other Gulf citizens.
World profit leader
The company also released its results for the nine months to September, saying net profits came in at US$68 billion. Aramco only began releasing interim financial results recently.
Its 2018 net profit of US$111.1 billion is higher than the profits of Apple, Google and Exxon Mobil combined.
The listing forms the cornerstone of Prince Mohammed’s ambitious plans to transform the Arab world’s biggest economy.
First suggested by the kingdom’s de facto ruler in 2016, the IPO was delayed several times reportedly due to his dissatisfaction with the valuation of the firm, which fell short of the hoped for US$2 trillion.
Last week, Energy Intelligence cited sources as saying they expect the Saudis to settle on a valuation of US$1.6 trillion to US$1.7 trillion.
It remains to be seen whether Saudi authorities are able to find “a compromise between the crown prince’s stated preference and market realities in their valuation of Aramco,” said Kristian Ulrichsen, a fellow of Rice University’s Baker Institute in the United States.
“As the process has been delayed repeatedly and built up as such an integral component of the crown prince’s plan to transform Saudi Arabia, international investors will pay very close attention to how Aramco performs on the domestic exchange.”
Aramco is the kingdom’s crown jewel and the backbone of its economic and social stability. It has boosted efforts to woo investors to by announcing an annual dividend of US$75 billion.
(AFP)