UK softens IPO rules as it targets Aramco

The UK will press ahead with plans to soften its listing regime to attract state-controlled companies such as Saudi Aramco, drawing criticism from lobby groups for investors and businesses.

The Financial Conduct Authority will introduce a new category of “premium listing” rules for commercial companies controlled by a country. The new regime won’t require prior shareholder approval for related-party transactions, the FCA said, meaning a government can buy and sell assets held by the firm without foreign investors getting a say.

“We continue to oppose the inclusion of companies in this new segment in all major equity indices as this would force UK savers to invest in these companies despite the loss of valuable and hard-won investor protections,” said Chris Cummings, chief executive officer of the Investment Association, whose members manage more than £6.9 trillion (Dh33.9 trillion).

The rule changes, effective July 1, were widely seen as having an eye to the upcoming IPO for Saudi Arabian Oil Co. UK authorities want to make sure London is selected alongside Riyadh for the sale, which Saudi officials have said they hope will raise $100 billion.

The new category won’t require prior approval from shareholders for relatedparty transactions but will insist on “timely disclosure,” while the election of independent directors will be subject to separate shareholder approval.

“The Institute of Directors is deeply disappointed that the FCA has decided to press ahead” with the new listing category, the lobby group’s director general, Stephen Martin, said. “The FCA not only risks the market’s reputation with investors but the UK’s global reputation as a leader in best practice and good governance.”

The Saudi Aramco initial public offering, originally planned for the second half of this year, will now most likely happen in 2019, the kingdom’s oil minister said.

Director, Carnegie Middle East Centre