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Abu Dhabi, UAEThursday 21 June 2018

Aramco international listing still on the cards, Saudi finance minister says

New York, London, Hong Kong are potential venue options

In two days, the oil market dispelled the pessimism of two weeks largely dominated by concerns over US-China tensions. Ali Jarekji /Reuters
In two days, the oil market dispelled the pessimism of two weeks largely dominated by concerns over US-China tensions. Ali Jarekji /Reuters

Saudi Arabia is still considering New York, Hong Kong and London for part of its initial public offering of shares in energy company Saudi Aramco, Finance Minister Mohammed Al Jadaan said.

The IPO remains “on track", he said in an interview on Wednesday with Bloomberg Television in Washington, without elaborating on a time frame. “We are assessing still international markets - New York, London, Hong Kong - and obviously the anchor market is Saudi Arabia, so no decision has been made.”

“The Aramco IPO is one important part of a large reform that is taking place in Saudi Arabia,” Mr Al Jadaan said, alluding to Crown Prince Mohammed bin Salman’s economic program to transform and diversify Saudi Arabia, dubbed Vision 2030.

Saudi Arabia’s energy minister said last week that the IPO could be delayed until 2019.

The Wall Street Journal reported on Monday that Saudi Arabia was scaling back its plans to sell shares in the state-owned entity formally known as Saudi Arabian Oil Company, choosing to list only on the domestic stock exchange next year to give the government more time to determine whether to also use an international venue. The story cited unidentified government officials and others close to the process.

The expected IPO is of keen interest to business leaders meeting with the crown prince during his three-week tour of the United States. Currently in Washington, Prince Mohammed plans additional stops in Boston, New York, Seattle, San Francisco, Los Angeles and Houston, where he will visit an Aramco facility.

Saudi officials hope they will raise as much as $100 billion by selling up to 5 percent of the company, valuing Aramco at $2 trillion. Yet, many observers have questioned that valuation, suggesting a realistic figure is nearer $1tn.

Prior to the crown prince’s visit to the US, Aramco executives and government officials pitched their plan for what could be world’s largest share sale to some of the biggest US mutual fund firms and hedge funds, people familiar with the discussions said earlier this month.

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Read more:

London’s last chance to win $2 trillion Aramco prize

Why a domestic listing for Saudi Aramco is back on the agenda

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At informal dinners and meetings in New York, Houston and Washington, investors pushed back at several aspects of the deal, the people said, asking not to be identified discussing private meetings. Among the issues raised were the $2tn valuation Saudi Arabia wants for the world’s largest oil producer, the scale of dividends Aramco’s prepared to pay and the impact of the shale boom on oil prices over the next few years.

Mr Al Jadaan also promised a dollar bond sale “in the next few weeks,” saying “we have almost hired” banks for the sale. Saudi Arabia has selected banks including JP Morgan Chase. and HSBC to help arrange the sale, people familiar with the matter told Bloomberg earlier, as the kingdom seeks to plug its budget deficit.

Goldman Sachs Group, Morgan Stanley and Citigroup will also manage the offering that may happen as soon as this month, the people said, asking not to be identified because the information is not public.

The world’s biggest oil exporter plans to borrow the equivalent of $31bn this year to bridge an expected budget deficit of $52bn and fund growth plans after its economy shrank last year. Last week, the kingdom said it is increasing a $10bn syndicated loan by $6bn after existing lenders and new banks showed “an exceptional response”.