ARAMCO TO LIST IN RIYADH
Prospectus will be released on Nov 9, shares may start trading next month
SAUDI Arabia finally kicked off what could be the world’s biggest initial public offering (IPO), revealing potential tax cuts and dividends to attract investors.
More than three years after Crown Prince Mohammed Salman first raised the idea — and just three weeks after a plan to launch the share sale was abruptly delayed — oil giant Saudi Aramco announced its intention yesterday to list shares on the local stock exchange in Riyadh. The shares are likely to start trading nex month.
Aramco’s valuation will be determined during the investor roadshow and book-building for the IPO, said chairman Yasir AlRumayyan. It will proceed with the IPO even if the valuation proves to be less than the US$2 trillion (RM8.33 trillion) the Crown Prince is seeking, he said.
“If we consider an international listing, it will be in the future.”
Aramco will release a prospectus for the IPO on Nov 9, said chief executive officer Amin Nasser.
Aramco generated the most profit of any corporation last year with net income of US$111 billion — more than Apple Inc, Google’s parent Alphabet Inc and Exxon Mobil Corp combined. It was targeting a US$2 trillion valuation — more than double that of Apple — but the kingdom is now ready to accept a valuation of US$1.6 trillion to US$1.8 trillion to ensure the IPO is a success, said people briefed on the matter.
The proceeds from the IPO will boost the firepower of Saudi Arabia’s sovereign wealth fund, which already has investments in funds managed by Blackstone Group LP and SoftBank Group.
Aramco earned a net income of US$68 billion and generated US$244 billion in revenue and income related to sales in the first nine months of the year, it said in a statement yesterday. It expects capital expenditure of US$35 billion to US$40 billion next year, rising to US$40 billion to US$45 billion in 2021.
Aramco and the government agreed to amend royalties on oil and condensate effective Jan 1, said the company. It will reduce the royalty to 15 per cent from 20 per cent when Brent prices are less than US$70 a barrel, increase it to 45 per cent from 40 per cent on prices between US$70 and US$100 a barrel, and raise it to 80 per cent from 50 per cent on prices above US$100.
Aramco will pay a tax rate of 20 per cent on its domestic downstream business starting next year — compared with current levies of between 50 to 80 per cent — provided it consolidates this business under a separate, wholly-owned unit by end-2024. An exemption from royalties on condensate production will be extended for an additional 10 years when it expires at the start of 2023, itsaid.
Aramco’s board also confirmed plans to pay US$75 billion in dividends next year, in addition to any potential special dividends. It has considered raising that to US$80 billion. At US$1.8 trillion that would mean a yield of 4.4 per cent, a decent payout in a lowinterest-rate world, but still lower than the five per cent Exxon investors currently get.