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Saudi Aramco signals fresh momentum behind IPO plans

Monday, September 2, 2019

Significance

Reports last month that Aramco had selected Lazard for a contract to work as adviser on the IPO breathed new life into a deal that has been marking time since mid-2018. Prospective investors have also been encouraged by Aramco’s recent announcement of interim results, marking a further development in public disclosure following the successful 12-billion-dollar bond issue in April. The original plan was to offer a 5% stake to generate 100 billion dollars for the Public Investment Fund (PIF), based on a 2-trillion-dollar valuation.

Impacts

  • The new advisory team may recommend modifying the planned IPO terms, especially given Aramco’s acquisition of 70% of SABIC.
  • The IPO will give Aramco an opportunity to elaborate further its long-term strategy to adapt to the global shift away from fossil fuels.
  • A listing of Aramco’s shares would boost Saudi market capitalisation and attract additional investment inflows.
  • The interests of new minority shareholders and the dominant state shareholder could diverge, including over dividend policy.
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