Aramco’s record IPO starts Nov 17, offer size pending

By BLOOMBERG / Pic By BLOOMBERG

DUBAI • Saudi Arabian Oil Co (Aramco) will allow investors to start bidding for shares in the world’s most-profitable company from Nov 17. It left potential buyers in the dark about the size of the stake it plans to sell and the pricing range.

The Saudi stock exchange rules prohibit the oil giant from listing additional shares for six months after the start of trading, according to its more than 650-page prospectus. Also, the Saudi government, the company’s sole owner, won’t offer any additional shares during the 12-month period after listing, but retains the right to sell to foreign governments or investors affiliated with foreign governments.

Key details:

• Institutional book-building period: Nov 17-Dec 4.
• Retail subscription period: Nov 17-28.
• Targeted percentage of shares allocated to individual investors will be up to 0.5% of shares.
• Final pricing: Dec 5.
• Refund of excess subscription amount to individual investors: Dec 12.
• Aramco sets up share-incentive plan for employees.

Saudi Arabia is pulling out all the stops to ensure the success of the initial public offering (IPO) after Crown Prince Mohammed Salman finally decided to offer shares in the world’s largest oil producer.

The kingdom cut taxes on Aramco for a third time, revealed incentives for investors not to sell shares and is considering boosting dividends further.

While the prospectus includes Aramco’s profits for the first nine months and details of the company’s operations, it doesn’t include any indication of what valuation the government hopes to achieve. Price guidance for the share sale is expected this week, but people familiar with the deal have told Bloomberg that Prince Mohammed would be satisfied with a valuation of between US$1.6 trillion (RM6.61 trillion) and US$1.8 trillion.

‘Lack of Clarity’
“This lack of clarity in the prospectus shouldn’t alarm us as it’s a book building exercise and let’s be clear Saudi will do whatever it takes to make this IPO successful because so much hinges on it,” Nasser Saidi, president of Nasser Saidi & Associates said in an interview on Bloomberg TV yesterday. “This is part of an overall privatisation programme, which has often been delayed, so now we’re getting to the beginning of that programme.”

Analysts from 16 banks have offered a valuation on the company, ranging in estimates from US$1.1 trillion at the bottom right up to US$2.5 trillion. The midpoint was US$1.75 trillion, according to people who’ve reviewed all the research.

Aramco earned net income of US$68.2 billion in the first nine months compared to US$83.1 billion a year ago. Revenue slipped to US$217 billion from US$233 billion.

Saudis and China
With the Aramco IPO, there’s a lot at stake for Prince Mohammed, Saudi Arabia’s de facto ruler, and his Vision 2030 plan to overhaul the economy. He proposed the offering in 2016 as a way to expose the state-owned firm to the rigors of the market and raise money for the sovereign wealth fund.

The richest Saudis are being pressed to commit large sums to the IPO, according to people familiar with the matter. Among those considering sizeable purchases are the Olayan family and Prince Alwaleed Talal, the billionaire investor who was held for several weeks in Riyadh’s Ritz-Carlton Hotel during 2017’s declared corruption crackdown.

China, the world’s largest oil importer, may commit as much as US$10 billion through sovereign wealth funds and other state-owned enterprises, according to people familiar with the situation.

An investment would be a hedge against rising oil prices and chime with the objectives of Beijing’s ambitious Belt and Road programme. — Bloomberg