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SAUDI ARAMCO IPO FORMALLY PUT ON HOLD

An August 22 report by Bloomberg said Saudi Aramco has formally put an initial public offering on hold while the company focuses on buying a strategic stake in Saudi petrochemical group, Sabic, for as much as $70 billion. However, while the Sabic deal will delay the IPO, it doesn’t mean it’s canceled, people familiar with the matter told Bloomberg, asking not to be identified because the information is private. Khalid al-Falih, Saudi Arabia’s minister of energy,industry and mineral resources and Aramco chairman, said in a statement that the government was committed to the Aramco IPO “at a time of its own choosing when conditions are optimum.” In his statement, Al-Falih said the timing of the listing would “depend on multiple factors, including favorable market conditions, and a downstream acquisition which the company will pursue in the next few months, as directed by its board of directors. ”Bloomberg noted that even if the IPO is eventually revived, the Aramco-Sabic deal will allow the kingdom to achieve some of the original aims crown prince Mohammed bin Salman set for the IPO. The main difference would be the origin of the cash. Rather than equity investors, it would come from bank loans and bond investors. Aramco will raise funds from banks and international bondholders to buy a controlling stake in the petrochemical group. That money will go into the coffers of the kingdom’s sovereign wealth fund, which currently owns a 70 percent stake in Sabic. That will replace at least some of the money the Public Investment Fund had been expected to receive from the Aramco IPO. Doing a large international bond issue would also compel Aramco to reveal much of the same financial and business information as an IPO prospectus, bringing greater transparency to the world’s largest oil producer. Bloomberg said it had been told the board of directors of Aramco took the decision to put the preparations for the IPO on hold at a meeting earlier this month in Switzerland. The Aramco IPO has been a centerpiece of crown prince Mohammed’s reform program to diversify the country’s economy away from oil, known as Vision 2030. Saudi officials said they hoped to raise a record $100 billion by selling a 5 percent stake in the company, dwarfing the current record of $25 billion raised by Chinese retailer Alibaba Group Holding Ltd. in 2014. Aramco has hired several Wall Street banks, including HSBC Bank Plc, Morgan Stanley and JPMorgan Chase & Co., which have been working for months to prepare the IPO. Bloomberg said it had been told that Aramco had written to some but not all of its advisers on the IPO and asked them to suspend work for the time being. However. Al-Falih acknowledged in his statement that Aramco and its advisers had already done all the work needed to sell shares, saying: “The company, for its part, has completed its internal program for IPO preparedness.”