Watchdog met Saudis before City rules change

State-owned oil giant Aramco believed to be considering private stake sale amid IPO controversy

THE UK’S financial watchdog met executives working for Saudi Aramco before it proposed changes to its listing rules, it was revealed yesterday as reports also emerged that the stateowned oil giant is considering delaying its controversial international share sale.

Saudi Arabia unveiled plans to list 5pc of the shares in its state-owned oil company locally and on one other international stock exchange last year in a move that could value Saudi Aramco at more than $1trillion. The flotation is likely to be the world’s largest ever initial public offering, generating millions of fees for its advisers.

However, critics have claimed the FCA’S proposed changes to the London Stock Exchange listing rules are mainly an attempt to entice the giant oil company to pick London over rivals such as New York and argued they could damage the City’s reputation for corporate governance.

The Financial Conduct Authority suggested creating a new category within its “premium” listing in July, exempting some state-controlled companies from certain rules.

Andrew Bailey, the head of the FCA, has now told MPS that the watchdog discussed these changes with Saudi Aramco – the state-owned oil company of Saudi Arabia – some months before.

In a letter written in response to questions asked by members of two parliamentary select committees and published yesterday, Mr Bailey said that the watchdog “held conversations with Saudi Aramco and their advisers in light of their interest in a possible UK listing in the early part of this year”.

He added: “We emphasised during those conversations that we were reviewing the listing regime.”

However, Nicky Morgan MP, who chairs the Treasury Select Committee, said: “Questions remain about the level of political involvement in the consultation. The UK’S world-class reputation for upholding strong corporate governance mustn’t be watered down.”

The FCA proposed the new rules soon after Theresa May, the Prime Minister, and Xavier Rolet, the chief executive of the London Stock Exchange, travelled to Saudi Arabia in an attempt to drum up business and met Aramco’s chief executive Khalid alfalih in Riyadh.

The changes relate to the relations between a company and its controlling shareholder, and whether investors get to vote on independent directors. MPS also queried plans to allow Saudi Aramco to float less than the standard

‘The UK’S reputation for upholding strong corporate governance mustn’t be watered down’

amount of 25pc of its stock. But Mr Bailey said that current listing rules allow companies to float a smaller percentage providing there is sufficient liquidity – or volume of shares – in the market.

Amid the controversy over its float plans, Saudi Aramco is now consider- ing selling shares privately to sovereign wealth funds next year rather than listing in London or New York, the Financial Times reported last night. While the listing in Riyadh would go ahead, an international listing could be postponed at least another year.

Saudi Aramco responded that a range of options remained under review, adding that “no decision has been made and the IPO process remains on track”.