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WEALTH MANAGEMENT

Saudi Arabia tilting towards New York for Aramco IPO

Saudi Arabia tilting towards New York for Aramco IPO

London and Toronto are the others in the fray

IFM Correspondent

February 21, 2017: Saudi Arabia is favouring New York to list state oil giant Saudi Aramco. Additionally, the Kingdom is also considering London and Toronto for floating the firm, states a report by Wall Street Journal.

The listing of Aramco (IPO-ARMO.SE) is expected to be the world’s biggest initial public offer. The IPO is part of the government’s ambitious plan - known as Vision 2030 - to diversify the economy beyond oil. The government last year said it wants to transform Aramco from an oil-producing company into a global industrial conglomerate.

However, now there’s a debate on whether to make Aramco a specialised company focused purely on oil and gas or a conglomerate. Experts are of the opinion that a specialised company might be easier to value because of its simplicity and, since the risks in its business would be clearer, achieve a higher price for its shares.

Apart from oil and gas, the company has plans to build solar and wind-power facilities. As the kingdom's biggest company and one of its most efficient, it is being pressed into service to jump-start industrial projects that are too big or daunting for the private sector. Last year, Prince Mohammed said he expected the IPO would value Aramco at a minimum of $2 trillion.

Another issue haunting the company before its IPO is who will have the right to take production-related decisions – the government or the Aramco board. In May 2016, Aramco chief executive had said that production decisions would remain with the government. However, this may hamper the IPO since investors would like control over decisions related to production.


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