Saudi Aramco IPO Delayed until 2019, UK Officials Told
2018-03-13    [Source:Financial Times]
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Saudi Aramco’s listing is unlikely to go ahead this year, according to British officials who have been warned by their Saudi counterparts that the world’s biggest flotation was expected to be delayed. 

Several people briefed on the talks said London still had a good chance of securing the listing, which Riyadh said could value the state energy company at $2tn, but any foreign flotation was likely to happen in 2019 at the earliest.

Saudi Arabia wants to sell 5 per cent of the world’s largest oil-producing company as part of an economic reform programme driven by Mohammed bin Salman, the crown prince, who visited the UK last week. 

The kingdom had targeted a late 2018 listing, with shares to be sold on Saudi Arabia’s Tadawul exchange. But preparedness for the offering and willingness for a simultaneous or sequential flotation on a foreign exchange has been questioned.

Delays on IPO decision making came as advisers struggled to achieve the $2tn valuation that Prince Mohammed wants. Saudi Aramco’s finances and internal operations have been shrouded in secrecy for decades and its close relationship with the state has raised financial, legal and regulatory challenges.

UK officials said that if Riyadh decided to list abroad they expected a domestic and foreign listing to take place around the same time. One person close to the talks said this could take place in the first or second quarter of 2019.

London, New York and Hong Kong are among foreign bourses competing for the share sale. A private sale to strategic investors has been another option under consideration. 

Saudi officials have been split on where to list. Prince Mohammed, ultimate head of the kingdom’s oil affairs, has ambitions to list in New York and is hoping US officials will make regulatory concessions to pave the way for a deal there when he visits this month.

But senior ministers and Saudi Aramco executives have said privately that London might be a better fit.

Khalid al-Falih, the energy minister, told CNN last week: “I would say litigation and liability are a big concern in the US . . . Saudi Aramco is too big and too important to be subjected to that kind of risk.

Bankers have said people close to the royal court are trying to carve out an alternative solution in Asia, where the kingdom could list in Hong Kong and cornerstone investors in China could have a big role.

Amin Nasser, Saudi Aramco’s chief executive, said at a conference of British and Saudi business leaders on Thursday in London that all preparatory work required from the company would be completed in the latter half of 2018. 

This is a shift from previous comments from the kingdom’s officials who had said that preparations had already been completed and any final decision lay with the highest authorities in Saudi Arabia.

Indecision in Riyadh about the IPO structure has caused frustration among company executives and advisers. Decision making timelines have slipped and other options for a privatisation have emerged, as the complexities of executing the IPO have become clear — from legal risks to disclosure rules. 

Mr Falih told the Financial Times in January that “tactics have to be worked out and the timing”, even as Saudi Aramco executives had expected a final decision by the end of last year.

Saudi Aramco declined to comment on the timing of a listing.

Those working on the IPO said they were “still going through the motions” and were preparing for a late 2018 listing. But they have made clear to Riyadh that if they want an IPO at this time a structure needs to be decided by July.

Theresa May, UK prime minister, visited Riyadh last year with Xavier Rolet, former chief executive of the London Stock Exchange, as part of the British government’s attempt to secure the flotation.

But the aggressive campaign to win the offering has spurred domestic criticism, coinciding with a push by UK regulators to loosen listing rules for state-controlled entities.
 

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