Saudis look to sell 5% of oil firm

Ara­bian Oil IPO to pit Lon­don against N.Y. ex­change

Northwest Arkansas Democrat-Gazette - - BUSINESS & FARM - AN­THONY DIPAOLA

Saudi Ara­bia aims to sell about 5 per­cent of Saudi Aramco in an ini­tial pub­lic of­fer­ing next year, and stock ex­changes from the U.K. to Ja­pan are vy­ing for what may be the world’s rich­est IPO.

The Saudi crown prince, Mo­hammed bin Sal­man, will soon de­cide where to sell the com­pany’s shares af­ter gov­ern­ment of­fi­cials heard a pre­sen­ta­tion on the list­ing process last week, ac­cord­ing to peo­ple with knowl­edge of the mat­ter. The king­dom plans to list on the Saudi stock ex­change in Riyadh and sell shares on at least one stock ex­change out­side the coun­try. That choice pits the top global fi­nan­cial cen­ters, Lon­don and New York, against each other for a sale that could value the largest oil ex­porter at as much as $2 tril­lion.

The Saudis and their ad­vis­ers want to pick a for­eign ex­change or ex­changes with sim­i­lar list­ing and reg­u­la­tory re­quire­ments to the Riyadh ex­change, to avoid large de­vi­a­tions in pric­ing between the mar­kets, ac­cord­ing to other peo­ple fa­mil­iar with the sit­u­a­tion.

Saudi Ara­bian Oil Co., as the com­pany is for­mally known is look­ing at six main con­tenders for the prize: Lon­don, New York, Hong Kong, Tokyo, Sin­ga­pore or Toronto.

Lon­don im­proved its chances when reg­u­la­tors over­see­ing the Lon­don Stock Ex­change pro­posed rule changes last month that would make it eas­ier for gov­ern­ments to list their state-backed en­ti­ties, ac­cord­ing to the peo­ple with knowl­edge of the plans to de­cide soon on Aramco’s list­ing. The changes would al­low Aramco’s shares to trade on the Lon­don Stock Ex­change’s premium seg­ment, with ac­cess to a wider pool of in­vestors than a stan­dard list­ing.

The pro­pos­als would also elim­i­nate a re­quire­ment that sov­er­eign-con­trolled com­pa­nies list at least 25 per­cent of their shares to be el­i­gi­ble for the premium seg­ment. That’s a big con­ces­sion to the Saudis, who have said they plan to sell about 5 per­cent of the com­pany.

How­ever, the In­sti­tute of Di­rec­tors, a lead­ing U.K. business group, op­poses the changes as un­jus­ti­fied, say­ing the pro­pos­als mustn’t di­min­ish Lon­don’s rep­u­ta­tion for cor­po­rate gov­er­nance. The in­sti­tute urged the Fi­nan­cial Con­duct Author­ity to re­con­sider the pro­pos­als, its direc­tor gen­eral said in an emailed state­ment.

The IPO would bur­nish Lon­don’s rep­u­ta­tion as a fi­nan­cial cen­ter, given the U.K.’s plans to leave the Euro­pean Union. But for Aramco, the exit could tar­nish Lon­don’s ap­peal by re­duc­ing the num­ber of po­ten­tial buy­ers of the com­pany’s shares.

New York’s ap­peal to the Saudis as the fi­nan­cial hub of the world’s largest econ­omy is en­hanced by the re­la­tion­ship Prince Mo­hammed has cul­ti­vated with U.S. Pres­i­dent Don­ald Trump. Aramco has been one of three big­gest crude sup­pli­ers to the U.S. over the past four decades. The com­pany also owns the largest U.S. re­fin­ery, a plant in Port Arthur, Texas, through its wholly owned sub­sidiary Mo­tiva En­ter­prises LLC.

One risk to an Aramco list­ing in New York is a U.S. law al­low­ing vic­tims of ter­ror­ism to sue for­eign gov­ern­ments linked to at­tacks. Fifteen of the 19 hi­jack­ers who car­ried out the Sept. 11, 2001, at­tacks in the U.S. were Saudi cit­i­zens, and ad­vis­ers to the com­pany say that Amer­i­can of­fi­cials have pro­vided lit­tle as­sur­ance that Aramco wouldn’t be a tar­get of lit­i­ga­tion, ac­cord­ing to the peo­ple with knowl­edge of the sit­u­a­tion.

Aramco is also eval­u­at­ing a risk of broader lit­i­ga­tion in the U.S. that could emerge, for ex­am­ple, with share­hold­ers law­suits tar­get­ing the com­pany over en­vi­ron­men­tal con­cerns, ac­cord­ing to the peo­ple fa­mil­iar with how the Saudis and their ad­vis­ers are as­sess­ing the list­ing op­tions.

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