Saudi set to list world’s largest IPO

…As global bankers jostle for rewarding roles

Omobayo Azeez

Saudis’s government-owned oil company and globally acknowledged world’s largest oil company has accelerated its plan to float on a public exchange.

As part of plans towards achieving this groundbreaking dream, Aramco has invited more than 20 advisory firms to compete for a role in the listing planned as early as 2020.

In January 2016, Saudi Arabian leaders hatched a grand plan to float the world’s largest oil company on a public exchange.

According many casual observers, this was a logical plan, given the economic quagmire the Persian Kingdom had been plunged into, following the global oil price lurch.

Like many other oil producers, Saudi’s Aramco was faced with the competitive that followed America’s discovery of vast shale deposits and subsequent developments as this new supply outlet had upended the global oil market balance.

However, Riyadh also intended for this partial listing to fund its economic diversification agenda as the House of Saud had a vision to cut reliance on oil to almost zero by 2030.

Three years later, the IPO was still much of a pipe dream until April 2019, when Saudi Aramco debuted its first international bond of USD12bn, in a bid to purchase State-controlled SABIC.

According to Meristem Research in a report on Thursday, Bookbuilds revealed a USD100bn demand for the bond, this it described as an evidence that the world’s biggest moneybags each wanted slices of the world’s most profitable company, notwithstanding of the key government and country risks.

At this point, the report added, oil prices were c. USD72pb and it appeared that the IPO was put on hold in anticipation of higher oil prices.

With mounting risks to global oil prices and the country needing at least USD80pb to balance its budget this year, 2019, Riyadh has reopened preparation for the listing.

Reports show that in the half year to June 2019, Aramco saw revenues decline to USD147.86bn (-2.26 per cent), as earnings also recorded a steeper 11.54 per cent downturn to USD46.90bn on the back of higher purchases and production costs.

This situation further underscores the imperative for urgent diversification of the economic funding mix.

Meanwhile, the company has invited more than 20 advisory firms from the U.S., Europe and Asia to compete, including some of the world’s biggest underwriters as well as a number of smaller banks, a person familiar with the matter said last week.