Daily Management Review

Sources Say Despite Risks, New York Favored By Saudi Arabia For Aramco Listing


08/11/2017




Even though some financial and legal advisers have recommended London as a less problematic and risky option, Saudi Arabia favors New York for the main foreign listing of state oil giant Aramco, reported Reuter quoting sources.
 
Crown Prince Mohammad bin Salman - or MbS as he is known - who oversees the kingdom's economic and energy policies, will be the one who will take a final decision on where to stage what could be the world's largest initial public offering.
 
Internal disagreements between what some advisers are recommending and what the crown prince wants is pointed to by their comments.
 
The sources reportedly said that given the longstanding relationship between Riyadh and Washington, Prince Mohammad may choose to list Aramco on the New York Stock Exchange (NYSE) for "political considerations". However, a role in the choice could also be played by financial and commercial factors.
 
Beyond the Saudi exchange Tadawul, no decision has been taken yet on the listing venue, Aramco said in a statement. "All options continue to be held under consideration. There is no timetable requirement for an immediate definitive decision," Aramco said.
 
Vision 2030 is an ambitious reform plan to diversify the Saudi economy beyond oil which is championed by Prince Mohammad and selling around five percent of Aramco by next year is a centerpiece of that vision.
 
Partly due to concerns that a U.S. flotation would require greater disclosure of sensitive information on Aramco, several advisers have recommended London for the main listing outside Saudi Arabia.
 
But the favoured option for the Saudi government and Prince Mohammad is likely to be New York, one senior industry source reportedly said. "That is broadly correct," the source said, adding: "All awaits on the final shareholder decision."
 
Hong Kong is also a contender, apart from New York and London.
 
Tens of billions of dollars, to be invested to help develop other Saudi industries, is expected ot be raised by the flotation.
 
Exchanges are likely to be helped in winning listings from other Gulf states which are looking to part-privatise their commodity assets and they are therefore vying to win part of the flotation as it will bring a major boost to their trading volumes.
 
But some public misgivings that Riyadh is relinquishing its crown jewels to foreigners cheaply at a time of low oil prices has bene created by the Aramco plan.
 
Decisions on what Aramco's internal organisational structure would look like after listing or exactly which assets will be floated have not yet bene taken apart from choosing an exchange.
 
Although some analysts' estimates are between $1 trillion and $1.5 trillion, Prince Mohammed has said the IPO will value Aramco at a minimum of $2 trillion, and this is one of the main issues being discussed internally.
 
Listing on the New York market would bring greater scrutiny to Aramco's estimates of proven energy reserves and future oil prices, as well as its demand forecasts, even though it would mean access to more liquidity.
 
The outlook for oil prices, which are currently only half what they were three years ago, will be the deciding factor for the valuation.
 
"That's why Saudi Arabia needs a higher oil price for the IPO now, to get a better value for Aramco," the source reportedly said.
 
(Source:www.cnbc.com) 






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