Big banks head to Riyadh from Davos for oil giant IPO ‘beauty parade’
DAVOS: Some of the world’s leading investment bankers will go direct from Davos to Riyadh to take part in a “beauty parade” in front of Saudi Aramco officials to pitch for lucrative roles in the oil company’s planned initial public offering (IPO) later this year.
One banking chief, speaking on the sidelines of the World Economic Forum annual meeting in Switzerland, said that he and fellow executives were preparing to travel to the Kingdom early next week for a round of presentations in response to “request for proposal” invitations from Aramco.
Some of the biggest banks in the world are believed to be making the trip. In addition to HSBC, JP Morgan and Morgan Stanley, all of whom have already been working to advise the Saudis on the IPO, American banks Goldman Sachs and Citibank are believed to be pitching for the next phase of the process. The German giant Deutsche Bank is also believed to be involved in the presentations.
“If you’ve got ambition in the banking world you have to be involved in this. Everbody wants to be there. It’s the biggest privatization in history,” the banker said, speaking on condition of anonymity because of the delicate stage the IPO plans have reached.
The next phase — after advisers are chosen — will involve hard decisions on the venue for the listing, as well as possible proposals to sell some shares in Aramco to Russian and Chinese investors. In Davos this week it emerged that Russian investors had approached Aramco to discuss a possible share sale, possibly alongside Chinese investors.
The contest to stage the IPO — which could amount to $100 billion (SR374.8 billion) in value if the official valuation is met — appears to have come down to a choice between New York and London, in addition to a listing on the Riyadh stock exchange, the Tadawul. Hong Kong is also a possibility, especially if a big Chinese investor emerges.
The banker said he thought London was the favorite at this stage, mainly because of legal and regulatory hurdles in the US, though he stressed the decision was as much political as financial.
“New York presents a range of problems, with Sarbanes-Oxley (US investor protection laws), as well as Jasta (anti-terrorism financing legislation) and the whole system of class actions. The London legal system is different in many respects,” he said.
Aramco officials are using the opportunity of the Davos meeting to meet advisers and other potential stakeholders about the IPO.