Saudi Aramco is reportedly leaning towards listing its IPO in New York

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FILE PHOTO: A Saudi Aramco employee sits in the area of its stand at the Middle East Petrotech 2016, an exhibition and conference for the refining and petrochemical industries, in Manama, Bahrain, September 27, 2016. REUTERS/Hamad I Mohammed Saudi Aramco is reportedly leaning towards listing its IPO in New York Saudi Aramco is reportedly leaning towards listing its IPO in New York in aramco ipo pitch canada plays up its natural resources expertise 2017 5
FILE
PHOTO: A Saudi Aramco employee sits in the area of its stand at
the Middle East Petrotech 2016 in Manama

Thomson Reuters

(Reuters) – Saudi Arabia favours New York for the main foreign
listing of state oil giant Aramco, even though some financial and
legal advisers have recommended London as a less problematic and
risky option, people familiar with the matter told Reuters.

A final decision on where to stage what could be the world’s
largest initial public offering will be taken by Crown Prince
Mohammad bin Salman – or MbS as he is known – who oversees the
kingdom’s economic and energy policies, the sources said.

Their comments point to internal disagreements between what some
advisers are recommending and what the crown prince wants.

Prince Mohammad may choose to list Aramco on the New York Stock
Exchange (NYSE) for “political considerations”, given the
longstanding relationship between Riyadh and Washington, the
sources said. However, they added that financial and commercial
factors would also play a role in the choice.

Aramco said in a statement that no decision has been taken yet on
the listing venue, beyond the Saudi exchange Tadawul. “All
options continue to be held under consideration. There is no
timetable requirement for an immediate definitive decision,”
Aramco said in response to a Reuters request for comment.

Selling around five percent of Aramco by next year is a
centrepiece of Vision 2030, an ambitious reform plan to diversify
the Saudi economy beyond oil which is championed by Prince
Mohammad.

Several advisers have recommended London for the main listing
outside Saudi Arabia, sources familiar with the matter told
Reuters last month, partly due to concerns that a U.S. flotation
would require greater disclosure of sensitive information on
Aramco.

One senior industry source, however, said New York is likely to
be the favoured option for the Saudi government and Prince
Mohammad. “That is broadly correct,” the source said, adding:
“All awaits on the final shareholder decision.”

Apart from New York and London, Hong Kong is also a contender,
sources say. The flotation is expected to raise tens of billions
of dollars which would be invested to help develop other Saudi
industries.

The New York and London stock exchanges declined to comment.


A view shows Saudi Aramco's Wasit Gas Plant, Saudi Arabia December 8, 2014. Saudi Aramco/Handout via REUTERS  Saudi Aramco is reportedly leaning towards listing its IPO in New York Saudi Aramco is reportedly leaning towards listing its IPO in New York saudi arabia favors new york for aramco listing despite risks sources 2017 8
View shows Saudi Aramco’s
Wasit Gas Plant

Thomson
Reuters


Exchanges are vying to win part of the flotation as it will bring
a major boost to their trading volumes, and will be likely to
help them win listings from other Gulf states which are looking
to part-privatise their commodity assets.

But the Aramco plan has created some public misgivings that
Riyadh is relinquishing its crown jewels to foreigners cheaply at
a time of low oil prices. Some Aramco employees secretly wish the
whole idea would be shelved, sources say.

Apart from choosing an exchange, no decision has been made either
on exactly which assets will be floated, or what Aramco’s
internal organisational structure would look like after listing,
the sources say.

One of the main issues being discussed internally is the
valuation. Prince Mohammed has said the IPO will value Aramco at
a minimum of $2 trillion, although some analysts’ estimates are
between $1 trillion and $1.5 trillion.

Though listing on the New York market would mean access to more
liquidity, this would bring greater scrutiny to Aramco’s
estimates of proven energy reserves and future oil prices, as
well as its demand forecasts, all of which play a major role in
the company’s valuation, another industry source said.

For the valuation, much depends on the outlook for oil prices,
which are currently only half what they were three years ago.

“That’s why Saudi Arabia needs a higher oil price for the IPO
now, to get a better value for Aramco,” the source said.

The back-and-forth internal talks between the crown prince,
Energy Minister Khalid al-Falih, Aramco management and the many
financial and legal advisers on some of these main decisions have
raised speculation that the listing, which is expected to be in
the second half of 2018, could be pushed further out.

“They are still studying. When all is settled, they will present
all options to MbS,” said one industry source.

 

JASTA RISK

Aramco’s lawyers caution about litigation risks associated with
the U.S. Justice Against Sponsors of Terrorism Act (JASTA), two
sources said.

That law, passed last September, allowed lawsuits to proceed
against the Saudi government claiming it had helped to plan the
Sept. 11, 2001 attacks on the United States and should pay
damages to victims. Riyadh denies the allegations.

Finance Minister Mohammed al-Jadaan, a lawyer by training, is
most attuned to the legal risk of the four senior government
officials advising the crown prince on the listing decision, the
source said.

Falih, who is also Aramco’s chairman, Economy and Planning
Minister Adel Fakieh and Public Investment Fund Managing Director
Yasir al-Rumayyan are the other members of the crown prince’s
advisory committee, the source said, without elaborating on their
views.

The Finance Ministry did not respond to a request for comment on
the views of Jadaan.

Saudi industry sources dismissed JASTA as a reason for not
listing in New York, noting that Saudi Arabia is believed to have
hundreds of billions of dollars of investments in the United
States already, including Aramco assets.

They say the difficulty is related more to the disclosure process
and complex regulations in New York. These may legally interfere
with the sovereignty of the Saudi government, which would remain
the major shareholder of Aramco after the flotation.

While the London Stock Exchange has made winning the Aramco
listing a priority, the NYSE has not offered any regulatory
changes, a source familiar with talks between NYSE and Aramco
told Reuters last month.

Britain’s Financial Conduct Authority has proposed creating a new
“premium” listing category for companies controlled by sovereign
states which would exempt them from certain regulatory
requirements. The new rules are due to be published towards the
end of this year.

(Additional reporting by Tom Arnold in Dubai; Dasha Afanasieva in
London, John McCrank in New York, Editing by David Stamp)



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