Saudi Crown Prince Vows Aramco IPO by 2021, Keeps to $2 Trillion
2018-10-05 17:30:01.0 GMT
By Nayla Razzouk, Stephanie Flanders and Javier Blas
(Bloomberg) -- Saudi Arabia’s crown prince insisted the
stalled plan to sell shares in oil giant Aramco will go ahead,
promising an initial public offering by 2021 and sticking to his
ambitious view the state-run company is worth $2 trillion or
more.
The comments show 33-year-old Mohammed bin Salman’s
determination to press ahead with the IPO even after Riyadh’s
original timetable was undone by skepticism over the company’s
valuation and a plan for Aramco to buy a controlling stake in
the country’s biggest chemical producer.
"I believe late 2020, early 2021," he said, discussing the
timing of the IPO in an interview at the royal palace in Riyadh.
"The investor will decide the price on the day. I believe it
will be above $2 trillion. Because it will be huge."
The IPO project was first announced in 2016 as the
cornerstone of the prince’s Vision 2030 plan to modernize the
Saudi economy. Officials repeatedly said the deal was "on track,
on time" for the second half of 2018, but earlier this year they
said it would be delayed into 2019. Soon after, Aramco put the
IPO on hold and instead started talks to buy a majority stake in
local petrochemical giant Sabic, a deal potentially worth $70
billion.
*T
Read more on Aramco...
Aramco: Why Plans for Saudi Arabia’s Giant IPO Are Going
NowhereThe Aramco Accounts: Inside World’s Most Profitable
CompanyAramco Is Said to Get Cool Cool Response on IPO From U.S.
Investors
*T
Speaking late on Wednesday, surrounded by a handful of
advisers, Prince Mohammed said the IPO was "100 percent" in the
nation’s interest.
"Everyone heard about the rumors of Saudi Arabia canceling
the IPO of Aramco, delaying that, and that this is delaying
Vision 2030," he said. "This is not right."
Prince Mohammed said the IPO’s delay had its origin in
mid-2017, when it became clear that Aramco needed a push into
petrochemicals. He said it would had been unfair to go ahead
with the listing only to surprise investors soon after with a
big deal in chemicals.
The Aramco IPO would be a seismic event for financial
markets. Prince Mohammed said he hoped to raise a record $100
billion by selling a 5 percent stake, dwarfing the previous
record, set in 2014, when Chinese retailer Alibaba Group Holding
Ltd. raised $25 billion.
For Wall Street, it would be a money-maker, with banks from
JPMorgan Chase & Co. to Citigroup Inc. already working for
Aramco. Yet, in a world moving away from oil, the IPO would be a
test of the appetite of global for investors fossil fuels.
The most recent statements on when the IPO would happen
provided considerable room for maneuver. Energy Minister Khalid
Al-Falih said in August that Saudi Arabia would go ahead with
the project "at a time of its own choosing when conditions are
optimum."
Prince Mohammed has now given the company and its advisers
a new deadline, requiring the completion of the Sabic and
acquisition and a giant international share sale in less than
three years. Management and bankers will take some solace from
the fact they’ve already made many of the preparations needed
for an IPO, but it remains a daunting agenda.
Prince Mohammed said the deal between Aramco and Sabic,
which he hopes will close next year, was key for the future of
the country’s energy industry. The state-owned company can pull
it off easily due to its low debt, he said.
"If we want to have a really strong future for Aramco after
20, 30, 40 years from today, Aramco has to invest a lot in
downstream because we know that the new demand for oil 20 years
from now, it will be from petrochemicals," he said.
If Aramco had developed a separate petrochemical business,
Sabic would have definitely suffered, Prince Mohammed said,
partly because Aramco provides Sabic with the bulk of the fuel
it processes into chemicals.
Prince Mohammed said that the Saudi government will keep
the shares of Aramco after the IPO, rather than transfer them
into the sovereign wealth fund as originally planned. Instead,
the PIF will receive the $70 billion from the sale of its stake
in Sabic, plus the $100 billion that country hopes to raise from
the Aramco IPO.
"So PIF is good, the economic plans in Saudi Arabia is
good, and that deal is good for the downstream industry in Saudi
Arabia," he added, referring to the Aramco-Sabic deal.
Prince Mohammed provided a detailed timetable of his plans
for Aramco, saying that after the Sabic deal is completed in
2019, the company would need a full financial year before it can
go ahead and sell shares to the public.
"So the deal in 2019, one financial year in 2020 and then
immediately Aramco will be IPO-ed," he said late Wednesday.
"We’ve tried to push to IPO it as soon as possible, but this is
the timing, based on the situation that we have."
--With assistance from Donna Abu-Nasr, Alaa Shahine, Vivian
Nereim and Riad Hamade.
To contact the reporters on this story:
Nayla Razzouk in Riyadh at nrazzouk2@bloomberg.net;
Stephanie Flanders in Riyadh at flanders@bloomberg.net;
Javier Blas in London at jblas3@bloomberg.net
To contact the editors responsible for this story:
Will Kennedy at wkennedy3@bloomberg.net
Alaric Nightingale
2018-10-05 17:30:01.0 GMT
By Nayla Razzouk, Stephanie Flanders and Javier Blas
(Bloomberg) -- Saudi Arabia’s crown prince insisted the
stalled plan to sell shares in oil giant Aramco will go ahead,
promising an initial public offering by 2021 and sticking to his
ambitious view the state-run company is worth $2 trillion or
more.
The comments show 33-year-old Mohammed bin Salman’s
determination to press ahead with the IPO even after Riyadh’s
original timetable was undone by skepticism over the company’s
valuation and a plan for Aramco to buy a controlling stake in
the country’s biggest chemical producer.
"I believe late 2020, early 2021," he said, discussing the
timing of the IPO in an interview at the royal palace in Riyadh.
"The investor will decide the price on the day. I believe it
will be above $2 trillion. Because it will be huge."
The IPO project was first announced in 2016 as the
cornerstone of the prince’s Vision 2030 plan to modernize the
Saudi economy. Officials repeatedly said the deal was "on track,
on time" for the second half of 2018, but earlier this year they
said it would be delayed into 2019. Soon after, Aramco put the
IPO on hold and instead started talks to buy a majority stake in
local petrochemical giant Sabic, a deal potentially worth $70
billion.
*T
Read more on Aramco...
Aramco: Why Plans for Saudi Arabia’s Giant IPO Are Going
NowhereThe Aramco Accounts: Inside World’s Most Profitable
CompanyAramco Is Said to Get Cool Cool Response on IPO From U.S.
Investors
*T
Speaking late on Wednesday, surrounded by a handful of
advisers, Prince Mohammed said the IPO was "100 percent" in the
nation’s interest.
"Everyone heard about the rumors of Saudi Arabia canceling
the IPO of Aramco, delaying that, and that this is delaying
Vision 2030," he said. "This is not right."
Prince Mohammed said the IPO’s delay had its origin in
mid-2017, when it became clear that Aramco needed a push into
petrochemicals. He said it would had been unfair to go ahead
with the listing only to surprise investors soon after with a
big deal in chemicals.
The Aramco IPO would be a seismic event for financial
markets. Prince Mohammed said he hoped to raise a record $100
billion by selling a 5 percent stake, dwarfing the previous
record, set in 2014, when Chinese retailer Alibaba Group Holding
Ltd. raised $25 billion.
For Wall Street, it would be a money-maker, with banks from
JPMorgan Chase & Co. to Citigroup Inc. already working for
Aramco. Yet, in a world moving away from oil, the IPO would be a
test of the appetite of global for investors fossil fuels.
The most recent statements on when the IPO would happen
provided considerable room for maneuver. Energy Minister Khalid
Al-Falih said in August that Saudi Arabia would go ahead with
the project "at a time of its own choosing when conditions are
optimum."
Prince Mohammed has now given the company and its advisers
a new deadline, requiring the completion of the Sabic and
acquisition and a giant international share sale in less than
three years. Management and bankers will take some solace from
the fact they’ve already made many of the preparations needed
for an IPO, but it remains a daunting agenda.
Prince Mohammed said the deal between Aramco and Sabic,
which he hopes will close next year, was key for the future of
the country’s energy industry. The state-owned company can pull
it off easily due to its low debt, he said.
"If we want to have a really strong future for Aramco after
20, 30, 40 years from today, Aramco has to invest a lot in
downstream because we know that the new demand for oil 20 years
from now, it will be from petrochemicals," he said.
If Aramco had developed a separate petrochemical business,
Sabic would have definitely suffered, Prince Mohammed said,
partly because Aramco provides Sabic with the bulk of the fuel
it processes into chemicals.
Prince Mohammed said that the Saudi government will keep
the shares of Aramco after the IPO, rather than transfer them
into the sovereign wealth fund as originally planned. Instead,
the PIF will receive the $70 billion from the sale of its stake
in Sabic, plus the $100 billion that country hopes to raise from
the Aramco IPO.
"So PIF is good, the economic plans in Saudi Arabia is
good, and that deal is good for the downstream industry in Saudi
Arabia," he added, referring to the Aramco-Sabic deal.
Prince Mohammed provided a detailed timetable of his plans
for Aramco, saying that after the Sabic deal is completed in
2019, the company would need a full financial year before it can
go ahead and sell shares to the public.
"So the deal in 2019, one financial year in 2020 and then
immediately Aramco will be IPO-ed," he said late Wednesday.
"We’ve tried to push to IPO it as soon as possible, but this is
the timing, based on the situation that we have."
--With assistance from Donna Abu-Nasr, Alaa Shahine, Vivian
Nereim and Riad Hamade.
To contact the reporters on this story:
Nayla Razzouk in Riyadh at nrazzouk2@bloomberg.net;
Stephanie Flanders in Riyadh at flanders@bloomberg.net;
Javier Blas in London at jblas3@bloomberg.net
To contact the editors responsible for this story:
Will Kennedy at wkennedy3@bloomberg.net
Alaric Nightingale