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Saudi Arabia reportedly calls off Aramco IPO and disbands advisers

Saudi Arabia has scrapped its plans to list shares of state-owned energy giant Aramco on stock exchanges, Reuters reports.

The initial public offering was poised to be the largest ever and was at the center of Crown Prince Mohammed bin Salman’s ambitious plan to overhaul the Saudi economy. The Saudis had hoped to attract a $2 trillion valuation for Aramco, the world’s largest oil company, though some outside analysts have pegged its value at half that amount.

Doubt has been swirling around the IPO for months as the kingdom deferred making decisions on key parts of the stock market debut, including where to list shares overseas. Skepticism only grew deeper earlier this year when sources familiar with the process said Aramco would first list on its domestic exchange, the Tadawul, and put off an international listing.

Now, the kingdom will no longer seek to publicly list shares at home or abroad, several sources told Reuters. One source said the decision to cancel the IPO had been made “some time ago.”

Saudi Aramco has dismissed advisers working on the deal and is now focusing on acquiring a stake in Saudi Basic Industries, or SABIC, a domestic petrochemical company, two of the sources told Reuters.

Saudi Aramco declined to comment on the Reuters report.

If Saudi Aramco confirms the report, it would mark the end of more than 2½ years of intense market speculation, competition among exchanges and jockeying among banks for a role in the lucrative offering.

Crown Prince Mohammed first made the plans public in January 2016, when he was still the kingdom’s deputy crown prince.

The plan emerged during the depths of a crushing oil price downturn that sent crude futures from more than $100 a barrel to less than $30. The rout pushed Saudi Arabia’s budget into a deficit and ultimately forced the kingdom to coordinate production cuts among about two dozen oil-producing nations.

Saudi Arabia hoped to raise about $100 billion by offering the public the opportunity to own a small portion of Aramco. The kingdom planned to use the funds to expand its sovereign wealth fund, the Public Investment Fund, and underwrite the crown prince’s Vision 2030, a blueprint to diversify the nation’s economy.

Stock exchanges in New York, London and Hong Kong emerged as leading contenders to list Aramco shares. The crown prince reportedly favored listing on the New York Stock Exchange, but market watchers questioned whether Aramco, known for its secrecy, could meet the NYSE’s stringent transparency standards.

Amin Nasser, CEO of Aramco, told CNBC earlier this year that his company was prepared for a public offering in the second half of 2018, but was waiting for the government to choose an exchange. Indecision over the listing venue snarled the process, the Wall Street Journal reported earlier this year.

Aramco in July confirmed media reports that it had entered talks with the Public Investment Fund, to acquire a “strategic stake” in SABIC, the Saudi petrochemical company. The fund has a 70 percent stake in SABIC.

Aramco said the move would be consistent with Aramco’s strategy of diversifying into high value businesses, including refining crude oil into fuels and processing byproducts into petrochemicals like plastics. Aramco currently focuses on producing crude oil from that nation’s vast reserves.

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