TSX competes for a share of Aramco IPO

Bid for giant listing could be long shot, but U.S immigration policies may help Saudi Arabia ... has the potential to provide meaningful long-term benefits for Canada’s capital markets.

The Toronto Stock Exchange is vying for a piece of the expected initial public offering of Saudi Aramco as international bourses battle for a slice of what could be the world’s largest IPO.

TMX Group Ltd., the owner of the Toronto Stock Exchange, sent officials to Saudi Arabia as part of efforts by a Canadian consortium that includes major local banks to seek a slice of the IPO, TMX spokesman Shane Quinn told Bloomberg News.

“It’s a Team Canada approach,” he said. “We think with our expertise in the resource sector that this is something we want to pursue. We want to compete for this type of listing.”

TMX provided little detail about its efforts, saying it had joined a consortium of representatives of Canada’s capital markets space in a broader bid to attract more investment to the country.

The outreach includes a bid to list a chunk of an IPO of energy colossus Saudi Arabian Oil Co., as the company is formally known, which is expected to commence in 2018.

“Saudi Arabia represents an opportunity beyond one transaction and has the potential to provide meaningful long-term benefits for Canada’s capital markets,” Nick Thadaney, an executive with TMX Group, said in a statement.

A successful bid for the listing could be a long shot for the Toronto-based exchange. The sheer size of a Saudi Aramco listing has kicked off a particularly spirited competition among international bourses and banks to secure a portion of the proceeds.

The TSX has the largest concentration of oil and gas companies of any exchange in the world. Canada is also a leading destination for mining companies, which are listed on both the TSX and TSXVenture exchanges.

“TSX could offer a lower cost of capital because there’s more focus on resource names here,” said Paul Holden, a Toronto-based analyst with CIBC World Markets. “In Toronto maybe that company gets a lot more attention from the investment community.

“With Saudi Aramco it’s harder to make that argument because it’s such a large company, but that’s one reason why you would want to argue for TMX.”

The group will need to make a strong argument if it’s to elbow out the world’s largest exchanges.

Jim Krane, a fellow at Rice University’s Baker Institute in Houston, said he doesn’t see anything about the Toronto exchange “that suggests why the Saudis would use Toronto over another exchange that has deeper liquidity.”

However Krane, who studies Saudi energy policy, said that recent policies under U.S. President Donald Trump to limit immigration from some Muslim countries could deter the company from listing in New York. “That’s one of the thing that Toronto has going for it, is that it’s not in the United States.”

Several media reports on Tuesday said government officials in Singapore have been lobbying hard to attract Saudi Aramco to list on the country’s stock exchange, and have offered incentives to help lure in the company.

Other reports citing Saudi officials have said the company will consider listing on exchanges in London, Hong Kong and New York. Saudi Energy Minister Khalid al-Falih and others have said the company would list in Saudi Arabia as well as several other exchanges due to the size of the IPO.

The company has pegged its own value at roughly US$2 trillion, and is widely considered to be among the largest enterprises in the world. It claims to sit atop 260 billion barrels of proven oil reserves, compared to 173 billion barrels worth of proven reserves in all of Canada.

The public listing of Saudi Aramco is part of a push by Saudi Deputy Crown Prince Mohammed bin Salman to shift the country away from its dependence on fossil fuels.

For its part, the Toronto exchange is likely positioning itself as a commodity hub that will attract the attention of oil- and gasminded investors.