Saudis call off plans to list oil giant Aramco

Attention shifts to gaining ‘strategic stake’ in local petrochemicals maker

SAUDI Arabia has called off plans for the domestic and international listing of state oil giant Aramco, billed as the biggest stock flotation in history, four senior industry sources said on Wednesday.

Financial advisers working on the planned listing have been disbanded as Saudi Arabia shifts its attention to a proposed acquisition of a “strategic stake” in local petrochemicals maker Saudi Basic Industries, two of the sources said.

“The decision to call off the IPO was taken some time ago, but no one can disclose this, so statements are gradually going that way – first delay then calling off,” a Saudi source familiar with the IPO plans said.

“The message we have been given is that the IPO has been called off for the foreseeable future,” said a second source, a senior financial adviser.

“Even the local float on the Tadawul Stock Exchange has been shelved,” that person said.

Early yesterday, Saudi Arabia’s energy minister issued a denial that the IPO had been called off.

“The government remains committed to the initial public offering of Saudi Aramco, in accordance with the appropriate circumstances and appropriate time chosen by the government,” Khalid al-Falih said in a statement.

Falih said Riyadh had taken measures to prepare for the listing and the timing would depend on factors including favourable market conditions.

The proposed listing of the national champion was a central part of Crown Prince Mohammed bin Salman’s reform drive aimed at restructuring the kingdom’s economy and reducing its dependence on oil revenue.

Predicting

The prince announced the plan to sell about 5 percent of Aramco in 2016 via a local and an international listing, predicting the sale would value the whole company at $2 trillion or more. Several industry experts questioned whether a valuation that high was realistic, which hindered the process of preparing the IPO for the advisers.

A third industry source said the IPO had been called off for the time being but that it could be revived in future, if appropriate.

“It has been postponed until further notice,” the source said.

Stock exchanges in financial centres including London, New York and Hong Kong have been vying to host the international tranche of the share sale. An army of bankers and lawyers have competed to win advisory roles in the IPO, seen as a gateway to a host of other deals they expect to flow from the kingdom’s wide privatisation programme.

International banks JPMorgan, Morgan Stanley and HSBC were working as global co-ordinators.

Boutique investment banks Moelis & Co and Evercore were chosen as independent advisers and law firm White & Case as legal adviser.

More banks were expected to be named but no bookrunners were formally appointed despite banks pitching for the deal.

Aramco had a budget which it used to pay advisers until the end of June.

This has not been renewed, a source said.

“The advisers have been put on standby,” a fourth source, a senior oil industry official, said.

Sources have previously said that in addition to the valuations, disagreements among Saudi officials and their advisers over which international listing venue to be chosen had slowed the IPO preparations.