Saudi Aramco is said to call off IPO

Wael Mahdi and Javier Blas August 22, 2018

KUWAIT and LONDON (Bloomberg) -- Saudi Arabian Oil Co. is focusing on buying a strategic stake in chemical giant Saudi Basic Industries Corp., putting work on its potential initial public offering on hold, according to people familiar with the matter.

While the move will further delay the IPO, it does not mean the planned share sale is formally canceled, the people said, asking not to be identified because the matter is private. Aramco, as the company is known, wrote to some but not all of its advisers on the IPO and asked them to suspend work for now, one of the people said.

Aramco declined to comment. CEO Amin Nasser said last month that a Sabic deal would affect the time frame for the IPO.

Reuters reported earlier today that Saudi Arabia had called off the domestic and international IPO and disbanded its financial advisers, citing four unidentified industry sources.

The Aramco IPO has been a centerpiece of Saudi Crown Prince Mohammed bin Salman’s reform program to diversify the country’s economy away from oil.

IPO planning

The IPO process started in January 2016, when the crown prince said Riyadh was considering selling shares in Aramco, kicking off a deal set to be the world’s largest-ever flotation.

For almost two years, Saudi officials repeatedly said the IPO was "on track, on time" for the second half of 2018. They said earlier this year that it would be delayed into 2019. In May, Saudi Energy Minister Khalid al-Falih said that the sale would "most likely” happen next year.

The proposed deal for Aramco to buy a stake in Sabic from Saudi Arabia’s Public Investment Fund, which was announced last month, marked a shift in emphasis. The sovereign wealth fund’s stake is worth about $70 billion, and Aramco is said to be considering an international bond to finance the deal.

The international IPO is proving difficult for several reasons. The crown prince has said Aramco should be valued at $2 trillion or more, but some analysts put the figure much lower. Saudi authorities are also struggling to reconcile their desire for the biggest possible pool of capital, likely in New York or London, with their preference for less-stringent regulation, which would point to Hong Kong.