Saudi Arabia reportedly calls off Aramco IPO, disbands advisers

Saudi Arabia has reportedly canceled plans to list shares of its state-owned oil giant Aramco and dismissed advisers, according to Reuters, but the kingdom is disputing that report.

Sources familiar with the process have said it is inaccurate to say the initial public offering is off the table.  However, work associated with the offering has indeed slowed down as Aramco focuses on another large deal, but advisers have not been dismissed indefinitely, one of the sources said.

An initial public offering from Aramco is expected to be the largest ever and is at the center of Crown Prince Mohammed bin Salman’s ambitious plan to overhaul the Saudi economy. The Saudis hope to attract a $2 trillion valuation for Aramco, the world’s largest oil company, though some outside analysts have pegged its value at half that amount.

Doubt has been swirling around the IPO for months as the kingdom deferred making decisions on key parts of the stock market debut, including where to list shares overseas. Skepticism only grew deeper earlier this year when sources familiar with the process said Aramco would first list on its domestic exchange, the Tadawul, and put off an international listing.

Now, the kingdom will no longer seek to publicly list shares at home or abroad and Saudi Aramco has dismissed advisers working on the deal, several sources told Reuters. One source said the decision to cancel the IPO had been made “some time ago.”

Aramco is now focusing on acquiring a stake in Saudi Basic Industries, or SABIC, a domestic petrochemical company, source told CNBC. That in part explains why advisers on the Aramco deal have been sidelined, the sources said.

Aramco initially declined to comment, but on Wednesday evening, the company’s chairman and Saudi Energy Minister Khalid al Falih issued a statement calling the Reuters report was not true.

“The Government remains committed to the IPO of Saudi Aramco at a time of its own choosing when conditions are optimum,” Falih said. “This timing will 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.

If Saudi Aramco confirms the report, it would mark the end of more than 2½ years of intense market speculation and competition among exchanges as well as jockeying among banks for a role in the lucrative offering.

Crown Prince Mohammed first made the plans public in January 2016, when he was still the kingdom’s deputy crown prince.

The plan emerged during the depths of a crushing oil price downturn that sent crude futures from more than $100 a barrel to less than $30. The rout pushed Saudi Arabia’s budget into a deficit and ultimately forced the kingdom to coordinate production cuts among about two dozen oil-producing nations.

Saudi Aramco IPO off not really surprising, says expert Saudi Aramco IPO cancellation not really surprising, says expert

Saudi Arabia hoped to raise about $100 billion by offering the public the opportunity to own a small portion of Aramco. The kingdom planned to use the funds to expand its sovereign wealth fund, the Public Investment Fund, and underwrite the crown prince’s Vision 2030, a blueprint to diversify the nation’s economy.

Stock exchanges in New York, London and Hong Kong emerged leading contenders to list Aramco shares. The crown prince reportedly favored listing on the New York Stock Exchange, but market watchers questioned whether Aramco, known for its secrecy, could meet the NYSE’s stringent transparency standards.

Amin Nasser, CEO of Aramco, told CNBC earlier this year that his company was prepared for a public offering in the second half of 2018, but was waiting for the government to choose an exchange. Indecision over the listing venue snarled the process, the Wall Street Journal reported earlier this year.

Aramco in July confirmed media reports that it had entered talks with the Public Investment Fund, to acquire a “strategic stake” in SABIC, the Saudi petrochemical company. The fund has a 70 percent stake in SABIC.

Aramco said the move would be consistent with Aramco’s strategy of diversifying into high value businesses, including refining crude oil into fuels and processing byproducts into petrochemicals like plastics. Aramco currently focuses on producing crude oil from that nation’s vast reserves.

The deal would also allow the Public Investment Fund to generate cash from its investment in SABIC.