Singapore said to plan series of incentives to lure Aramco IPO

Dinesh Nair, Ruth David, Andrea Tan and Scott Deveau February 06, 2017

LONDON (Bloomberg) -- Singapore is considering a range of measures to lure a listing from energy giant Saudi Arabian Oil Co., according to people familiar with the matter, as global exchanges compete for a slice of what could be the world’s largest-ever initial public offering.

The island nation is studying proposals, including inviting one of its state investment companies to become a cornerstone investor in Aramco’s IPO, as well as potential Singapore cooperation with the Saudi government on future investments, the people said. Singapore Exchange Ltd. management including CEO Loh Boon Chye visited Saudi Arabia late last year to pitch a listing on the bourse, according to the people, who asked not to be identified as the information is private.

Singapore, the biggest oil trading center in Asia, is hoping a full package of government incentives will give it a better chance of winning a piece of the listing than a standalone proposal from the stock exchange, the people said. Aramco is yet to make a final decision on the venue for the IPO, and Singapore faces challenges from larger international exchanges, the people said.

The country’s plan shows the extent to which Asian economies are vying for a share of the IPO, which is estimated to be about $100 billion in size. Aramco officials have also received pitches on a potential Hong Kong listing for the company, which could come with anchor investments from Chinese funds, people familiar with the matter said last year. Company executives have also mentioned the possibility of listing in London, New York, Tokyo or Toronto.

TMX Group Ltd., the owner of the Toronto Stock Exchange, sent officials to Saudi Arabia as part of efforts by a Canadian consortium that includes major local banks to seek a slice of the IPO, said TMX spokesman Shane Quinn.

“It’s a Team Canada approach,” he said. “We think with our expertise in the resource sector that this is something we want to pursue. We want to compete for this type of listing.”

Manchester United

The biggest Singapore IPO by a foreign company was the $980 million offering in 2006 from Thai Beverage Pcl, the maker of Chang beer backed by billionaire Charoen Sirivadhanabhakdi, according to data compiled by Bloomberg. Singapore’s average daily stock trading was about $761 million last year, compared with $5.8 billion in Hong Kong and $7.4 billion in London, the data show.

“SGX is the world’s most international exchange and offers unique access to Southeast Asia’s markets,” the bourse operator said in an emailed statement, without commenting specifically on a potential Aramco listing. “Singapore is a well-regulated international financial center with strong corporate governance.”

A representative for Aramco declined to comment, while a representative for Singapore sovereign wealth fund GIC Pte didn’t immediately respond to an email seeking comment. Temasek Holdings Pte, the Singapore state-owned investment company, “looks at opportunities for investment based on its intrinsic value tests,” spokesman Stephen Forshaw said by email. “We do not provide views on our interest or intentions with respect to individual companies.”

SGX has previously tried to attract big-ticket listings from overseas. Magnus Bocker, who was then the exchange’s CEO, personally led a 2011 push to win a $1 billion IPO from famed English soccer team Manchester United, people with knowledge of the matter said at the time.

$2-trillion company

The Southeast Asian bourse was also trying to woo a 2012 share sale by Formula One that could have raised as much as $3 billion, according to people with knowledge of the matter. Manchester United eventually chose to list in the U.S., while Formula One’s IPO didn’t take place in part due to a volatile equity market.

Aramco plans to sell shares on at least two or three stock markets in 2018 with a base listing in Riyadh, Saudi Energy Minister Khalid Al-Falih told reporters last week. No single bourse would be able to absorb the entire offering, Al-Falih said.

The kingdom plans to sell less than 5% of Aramco as part of plans by Deputy Crown Prince Mohammed bin Salman to set up the world’s biggest sovereign wealth fund and reduce the economy’s reliance on oil. Saudi Arabia has estimated that the entire company could be worth more than $2 trillion.

Aramco has asked banks, including Goldman Sachs Group Inc. and HSBC Holdings Plc, to pitch for an advisory role on the IPO, people with knowledge of the matter said last month. Saudi Arabia, the world’s largest oil exporter, estimates that it holds more than 266 Bbbl in crude reserves. The country pumped 10.48 MMbopd in December, data compiled by Bloomberg show.

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