Saudi Aramco May Scrap IPO, Going with Private Investors
Saudi Aramco is considering the sale of a stake to a Chinese investor as plans for its highly-anticipated international public offering are pushed beyond its Y 2018 target, sources familiar with the matter said Friday.
The IPO (initial public offering) is expected to be the world’s largest stock sale, and is a Key component of the Saudi government’s economic reform program which aims to diversify the Kingdom away from its reliance on Crude Oil exports.
A private placement of shares in the state Oil company to a Chinese investor is being evaluated as a precursor to the international IPO.
The investor or how much of Aramco would be sold is not known.
The move would provide Saudi Arabia with cash to help implement the National Transformation Program (NTP).
The NTP comprises a number of economic adjustments for Saudi Arabia including removing some state subsidies and raising taxes that are aimed at taming huge budget deficits caused by lower Crude Oil prices.
The Saudi economy entered recession in the second quarter, consumer prices are falling and unemployment among Saudis is at 12.8%.
A Saudi Aramco spokesman said: “A range of options, for the public listing of Saudi Aramco, continue to be held under active review. No decision has been made and the IPO process remains on track.”
Aramco’s dual listing on the Saudi stock market, Tadawul, and an international exchange had been earmarked for Y 2018 by the Saudi authorities with stock markets in New York, London and Asia all vying for the offering.
A decision on which exchange would secure the offering has not been made, with top members of the Saudi royal family preferring New York and Aramco’s financial and legal advisers advocating London.
Both markets have political issues which have caused the Saudis unease and delayed the location decision.
The FT reported that Aramco had held talks about a private stake sale to foreign governments including China, and other investors, amid growing concerns about the feasibility of an international listing.
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