BEHIND THE STORY
What are the likely outcomes from Saudi Aramco’s IPO approval?
Saudi Arabia has finally greenlighted the much-awaited listing of shares in state oil giant Aramco on the domestic exchange, Tadawul, expected before the end of the year. The share offering, slated to be the largest and expected to eclipse that of Alibaba’s listing, has intrigued global investors and gripped banks and financial advisers. Yesterday the oil behemoth offered some clarity on its mammoth IPO exercise. Here are the highlights:
What percentage of shares is Aramco likely to offer and at what price?
The valuation will be determined after the conclusion of the company’s roadshows and book-building exercises, which will happen over the weeks ahead, according to Saudi Aramco chairman Yasser Al Rumayyan.
Who is allowed to invest in Aramco’s IPO?
Saudi and GCC citizens and foreign institutional investors can participate. Saudi family businesses and individuals have also been encouraged with the company promising a bonus share for every 10 shares held for 180 days, with a maximum limit of 100 shares. The percentage of international versus local investors has yet to be determined, according to Mr Al Rumayyan. it will be announced following the company’s roadshows and book-building exercises.
When is the company’s prospectus likely to be published?
It will be published on Saturday, according to chief executive Amin Nasser.
How profitable is Saudi Aramco?
Saudi Aramco is the world’s most profitable company, reporting a net profit of $46.9 billion (Dh172.3bn) for the first half of 2019, higher than that of Apple, Google and Amazon. The company’s revenue for the first half was $163.9bn. Aramco also has a higher operating free cash flow as well as higher ebitda than any of the Big Oil companies. The company reported a net income of $111bn last year.
What is Aramco’s dividend policy likely to be?
Aramco plans to pay a dividend of $13.4bn for the quarter ending September 30 and will declare an interim dividend of a maximum $9.5bn pending approval from its board. The company’s board also intends to declare aggregate ordinary cash dividends of at least $75bn next year. The government plans to forgo its quarterly dividend over the next five years, if required to free up cash for other shareholders.
Where is Aramco likely to list next?
The government’s priority is for a local listing, with other options considered “in due course”, Mr Al Rumayyan said yesterday. Aramco has not specified possible foreign exchanges that are under consideration. Tokyo and Hong Kong could be prime locations for a listing as Gulf oil companies look towards Asia.
When is the domestic listing likely to happen?
Next month may be the earliest as the company is completing the process to determine the price range.
How is the IPO likely to affect the Saudi economy?
Aramco’s IPO will likely pave the way for more “marquee privatisations”, according to Bassel Khatoun, managing director, frontier and Mena at Franklin Templeton Emerging Markets Equity. The Aramco IPO, which is a key pillar of the Saudi state’s Vision 2030 policy of diversification is likely to raise billions of dollars through privatisation over the coming years, in addition to the Aramco proceeds, added Mr Khatoun. The proceeds from the IPO will be used by the kingdom’s sovereign Public Investment Fund to be reinjected into the economy. The listing is also likely to push other Saudi entities to open up their books and be subject to global practices of governance, according to Ihsan Buhulaiga, principal consultant at Joatha Consulting Centre.