SAUDI ARAMCO IPO WILL OFFER UP TO 0.5% OF SHARES FOR INVESTORS

Main shareholder the Saudi government will have 12-month ‘lock up’ period with no further shares made available

Saudi Aramco will begin its initial public offering subscription period next Monday and offer as much as 0.5 per cent of its shares to individual investors, the company said.

The subscription period for individual investors will run until November 28 and the institutional book-building period will end on December 4, the company said in its 658page prospectus released at the weekend.

The company did not offer a price range and said that it will be determined on December 5. Saudi Arabia’s government, the main shareholder of the company, will have a “lock up” period for 12 months, whereby it will not offer additional shares following the listing.

“Trading of the shares is expected to commence after all relevant legal requirements and procedures have been completed,” Aramco said. It added that an announcement of the start of trading of the shares will be made on Tadawul’s website.

Dates and times included in the prospectus are indicative and may be changed or extended subject to the approval of the Capital Markets Authority, according to the prospectus.

The company began the IPO process confirming its intention to float its shares on the Saudi Tadawul stock exchange on November 3. Aramco’s listing is central to Riyadh’s ambitions to transform the kingdom’s economy.

The funds from the share float are expected to boost spending on Vision 2030 realisation projects. These include the $500 billion futuristic economic free zone Neom and the Red Sea Project, a mega-tourism attraction.

Aramco, the most profitable commercial entity in the world, outshining the likes of Apple, Google and Amazon, recorded a $68 billion profit for the first nine months of the year and is slated to be the largest IPO to date, eclipsing China’s Alibaba listing in 2014 that raised more than $21.8bn on the New York Stock Exchange. In April Aramco issued a debut $10bn bond, which was hugely oversubscribed.

Filings for the bond prospectus revealed the sheer size of the company, with a profit touching $111.1bn in 2018. 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 board approval, the company said.

The energy behemoth is the world’s largest integrated oil and gas company, producing one in every eight barrels of crude oil globally. In 2018, Aramco produced 13.6 million barrels per day of oil equivalent, including 10.3 million bpd of crude oil.

Aramco generates much of Saudi Arabia’s revenues. The company was originally established by royal decree as a government-owned entity with a fully paid share capital of 60bn Saudi riyals (Dh58.76bn), consisting of 200 billion ordinary shares with no par value. The number of shares will not be affected by the offering, according to Aramco’s prospectus.

Apart from the Saudi investors, non-Saudis who are not resident in the kingdom and institutions other than Qualified Foreign Investors incorporated outside the country, can participate in the offering by entering into swap agreements. The company is offering one bonus share for every 10 allocated shares to investors who hold the shareholding through the “bonus holding period” of 180 days from the first day of trading. The retail investors will receive only a maximum of 100 bonus shares, according to the prospectus.

Aramco has also established an employee share scheme in a bid to offer additional incentives that “attract and retain qualified individuals and to further align the interests of such employees with shareholders of the company”, the prospectus said.

The employee share plan will close at the same time as the public offering and the government will allocate shares worth $1bn for the plan.

Aramco’s float was first mooted in January 2016 by Saudi Arabia’s now Crown Prince Mohammed bin Salman. The listing was delayed several times owing to market volatility and Riyadh’s intention’s to merge its energy interests. Aramco acquired a 70 per cent shareholding in Sabic, the Middle East’s biggest petrochemicals producer, earlier this year in a $69.1bn deal.

The kingdom pushed for the listing despite drone attacks in September on Aramco’s oil facilities in the Eastern Province, home to the largest oil processing centre globally and a producing field. The attacks took nearly 5 per cent of global output offline, affecting more than half of Saudi Arabia’s production but the company recovered and brought the production back to pre-attack levels within weeks.

Citigroup, Credit Suisse, Goldman Sachs, HSBC, JP Morgan, Merrill Lynch, Morgan Stanley, NCB Capital and Samba Capital are joint financial advisers on the transaction.

Aramco, the most profitable commercial entity in the world, made a $68bn profit for the first nine months of the year