Abu Dhabi, UAESunday 15 December 2019

9 things you need to know about the Saudi Aramco IPO

The National lists the highlights in the run-up to what could be the biggest IPO in the world

Saudi Arabia has finally approved the much-awaited listing of shares in the state oil giant Saudi Aramco on its domestic exchange, Tadawul, which is expected before year-end. The initial public offering slated to be the largest and expected to eclipse that of Alibaba's listing, has intrigued global investors, banks and financial advisers. On Sunday, the oil behemoth offered some clarity on its mammoth IPO exercise. The National presents some highlights:

What percentage of shares is Aramco likely to offer and at what price?

The valuation will be determined after the conclusion of the company's roadshows and book-building exercises to woo investors, which will happen over the coming weeks, according to Aramco chairman Yasir Al Rumayyan.

Who are allowed to invest in Aramco?

Saudi citizens, GCC nationals and foreign institutional investors can participate in the IPO. Saudi family businesses and individuals have been encouraged to participate in the offering with the company promising a bonus share for every 10 shares held for 180 days, with a maximum limit of 100 shares.

What percentage of shares has been allocated to foreign institutional investors versus local investors?

The percentage of international versus local investors is yet to be determined, according to Mr Al Rumayyan. The percentage will be announced following the company's roadshows, too.

When is the IPO prospectus likely to be published?

The company's listing prospectus will be published on November 9, according to chief executive Amin Nasser.

How profitable is Aramco?

Aramco is the world's most profitable company, reporting a net profit of $46.9 billion (Dh172.3bn) for the first half of 2019, higher than that of Apple, Google and Amazon. The company's revenue for the first half was an impressive $163.9bn. Aramco also has a high operating cash flow, free cash flow as well as more Ebitda than each of the Big Oil companies. The company reported a net income of $111bn last year.

What could be Aramco's dividend policy?

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 approval from its board. The board also intends to declare aggregate ordinary cash dividends of at least $75bn next year. The government plans to forgo its quarterly dividend over the next five years, if required to free up cash for other shareholders.

Where is Aramco likely to list next?

The government's priority is for a local listing, with other options to be considered "in due course", Mr Al Rumayyan said on Sunday. Aramco has not specified possible foreign exchanges that are under consideration for a second listing. Tokyo and Hong Kong could be prime locations for an IPO as regional oil companies pivot towards Asia.

When is the domestic listing likely to happen?

Early December may be the earliest as the company is completing the process over the coming weeks to determine the price range.

How is the IPO likely to impact the Saudi economy?

Aramco's IPO will likely pave the way for more "marquee privatisations", according to Bassel Khatoun, managing director, frontier and Mena, Franklin Templeton Emerging Markets Equity. The Aramco IPO is a key pillar of Saudi Arabia's Vision 2030 diversification policy, which may raise as much as $200bn over the coming years, said Mr Khatoun. The proceeds from the IPO will be used by the kingdom's sovereign Public Investment Fund to be re-invested into the economy.

The listing could also encourage other Saudi entities to open up their books and be subject to global practices of governance, according to Ihsan Buhulaiga, principal consultant at Joatha Consulting Centre.

Updated: November 13, 2019 04:39 PM

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