The timing remains subject to the state’s decision, says Nasser

By BLOOMBERG

KUWAIT • Saudi Aramco signalled another potential delay for the world’s largest initial public offering (IPO) after it started talks last week to buy a stake in a local petrochemical company.

The state-owned oil company said it may buy a strategic stake in Saudi Basic Industries Corp (Sabic) from the country’s sovereign wealth fund. Sabic carries a market value of little more than US$100 billion (RM405.99 billion) and the sovereign wealth fund controls a 70% stake.

Amin Nasser, Aramco’s CEO, said in an interview that the company is still in the early stages of talks and a deal isn’t certain. “A potential Sabic deal would affect the time frame for Aramco’s IPO,” Nasser told Arabiya television in an interview airing last Friday.

A stake in a chemical company like Sabic makes Aramco less vulnerable to volatile oil prices, and would be positive for its revenue, Nasser told Arabiya.

The remarks raise the spectre of further delay for an IPO that could raise as much as US$100 billion. Saudi Energy Minister Khalid Al-Falih said last month that while “ it would be nice if we can do it in 2019, there is a lot more at stake than just ticking a box and say, ‘We got this out of the way.”’

The plan to sell shares in the state oil giant next year is itself a delay from an original plan for 2018. For almost two years, Saudi officials said repeatedly the IPO was “on track, on time” for the second half of 2018.

Earlier this year, they admitted it would be delayed into 2019. In May, Al-Falih said the sale would “most likely” happen next year.

In June, though, the minister hinted at a fresh delay, saying only that it would be nice to sell shares in 2019. And many observers — including members of the company’s senior leadership — doubt whether it will happen at all.

“Aramco is ready for the initial offer and the timing remains subject to the state’s decision,” Nasser told Arabiya last Friday, reiterating a longheld position that leaves the final go-ahead with the royal court.

A key plank of Crown Prince Mohammed Salman’s plans to reform the Saudi economy, the Aramco IPO would be a seismic event for financial markets.

Saudi officials said they hope to raise a record US$100 billion by selling a 5% stake, valuing the company at more than US$2 trillion.

Such a deal would dwarf the US$25 billion raised by Chinese retailer Alibaba Group Holding Ltd in 2014.

However, some analysts, including Sanford C Bernstein & Co and Rystad Energy AS, have suggested a figure closer to US$1 trillion.

Aramco has hired several Wall Street banks, including HSBC Bank plc, Morgan Stanley and JPMorgan Chase & Co, which have been working for months to prepare the deal.