Aramco’s IPO is moving forward, as MbS gives it the green light
IPO WATCH- Aramco’s IPO is moving forward as MbS appears to accept valuation of less than USD 2 tn: Saudi Crown Prince Mohammed bin Salmangave on Friday the go-ahead for Aramco’s long-awaited IPO and an official announcement is expected as early as today, sources familiar with the matter told Bloomberg. The decision to move ahead signals a willingness by MbS to lose his valuation to USD 1.6-1.8 tn from USD 2 tn — a price that was largely rejected by international investors.
Saudi money will now be instrumental in pushing the share sale through: Aramco’s bankers will be relying on contributions from Saudi’s wealthiest families, and local asset managers (including those that look after government funds) have also been asked to buy heavily. Domestic banks, meanwhile, have been told to offer generous loans so that retail investors can buy Aramco shares.
Extra effort is being put into making Aramco’s stock more attractive: Aramco has announced its intention to pay USD 75 bn in dividends next year, which would give investors a yield of 3.75% if the company achieves a USD 2 tn valuation. And a guarantee is being made that the dividend won’t fall until after 2024, irrespective of oil prices. If the company has to reduce the total dividend to less than USD 75 bn, it will cut back on government payouts, it has said.
Aramco’s top brass are getting smaller compensation packages to help the company through. Some 17 top Aramco management and board members took away USD 30 mn last year — about half of what ExxonMobil and Chevron offered their top brass, according to Bloomberg, which it says reflects how the Saudi business community sees the IPO.
Aramco could be listed on the Tadawul before the end of the year. We reported last week that Al Arabiya had announced the expected timeline of the IPO:
- Sunday, 3 November: Saudi Arabia’s Capital Markets Authority is set to announce the start of the IPO process.
- Sunday, 17 November: The share price on offer will be announced.
- Wednesday, 4 December: Subscription to the offering will begin.
- Wednesday, 11 December: First day of trading.
Size of the offering: If Saudi gets a USD 2 tn valuation, it would hope to bring in USD 20 bn from the sale of 1% of Aramco on the Tadawul in December. It has also planned another 1% offering in 2020, sources told Reuters last month. The sales will be the jumping off point to a public sale of around 5% of Aramco at some later date.
Advisors: JPMorgan Chase, Morgan Stanley, Bank of America Merrill Lynch, Goldman Sachs Group, Credit Suisse Group, Citigroup, HSBC, Saudi Arabia’s National Commercial Bank, and Saudi Arabia’s Samba Financial Group, were all given the mandate for the IPO. Our friends at EFG Hermes are doing joint bookrunner duties.
Do, what does this mean for the government’s stake sale program here in Egypt? Banks advising on our state privatization program have urged the government to factor the Aramco IPO into their plans, Public Enterprise Minister Hisham Tawfick said in an interview. “Aramco is the biggest IPO in the world and we should take it into consideration when deciding the timing of our offerings. This is the message we got from the investment banks,” he said. Whether this means bringing sales forward to before the reported date of Aramco’s offering or pushing them further back is unclear, he tells Bloomberg, but authorities are due to meet advisors “soon” to discuss the timing. He confirmed that Abu Qir Fertilizers and Alexandria Container & Cargo Handling would be the next in line for a share sale.
… and while we’re still on privatization, state-owned Heliopolis Housing and Development (HHD) announced that bidding on acquiring a 10% stake with management rights was still officially open, according to a bourse statement (PDF). The company noted it will still receive bids even after approving the draft contract, which is expected to take place on 23 November. A total of three companies managed to meet the initial deadline of 14 October.