Saudi Arabia considers delaying foreign part of Aramco IPO until 2019

By Javier Blas and Dinesh Nair

Saudi Arabia is considering delaying the international portion of the giant initial public offering of its state oil company until at least 2019, according to people familiar with the situation, who said a domestic share sale in Riyadh could still happen next year.

A two-stage Saudi Aramco IPO is one of the several options being considered, the people said, asking not to be identified because the discussion is private. Another plan would include listing in Riyadh next year and privately selling a stake in Aramco to one or several cornerstone investors, one of the people said.

Aramco said in a Twitter message on Saturday that all listing venues were under review for the IPO, expected to be the largest in history, and reports that a local listing in 2018 could be combined with a stake sale to a Chinese investor were "entirely speculative."

The IPO is the centrepiece of a broad-ranging economic reform program proposed by Crown Prince Mohammed bin Salman, the dominant political force in the kingdom. Any delay would be a setback to his plans as well as the plethora of international investment banks and international exchanges eyeing millions in fees and commissions.

Contingency Plans
Saudi Arabia has been making contingency plans for a possible delay of the IPO, Bloomberg News reported last month. While the government has insisted the original timetable remains on track, several important decisions have yet to be taken, including a location for the international listing, stretching the ability of the company to sell shares overseas before the end of next year.

There is a precedent for bringing in cornerstone investors before a groundbreaking commodities IPO. Glencore Plc sold in 2009 a stake through a convertible bond ahead of its 2011 IPO, still the largest ever in London where the company raised nearly $10 billion.

Despite the work on alternative plans, Saudi Arabia said earlier this month that schedule for the blockbuster initial public offering wasn’t “slipping” and the country still planned a sale by the end of 2018.

The government is “moving right ahead” for an IPO of Saudi Aramco in the second half of next year, Oil Minister Khalid Al-Falih said in Moscow. “There is nothing to indicate that schedule is slipping in any way.”

The government has said the sale of 5 percent of the shares could value the company at as much as $2 trillion, though analysts have tended to give lower estimates. If Saudi Arabia achieves its valuation, the 5 percent stake it plans to sell would raise about $100 billion. That would eclipse the $25 billion raised by Alibaba Group Holding Ltd. in 2014.

London and New York exchanges are vying for a role in Aramco IPO, with Hong Kong, Singapore, Tokyo and Toronto also trying to attract the sale. The Financial Conduct Authority, the U.K. markets regulator, on Friday, defended a proposal to change listing rules that would make it easier for Saudi Aramco to list in London. Lawmakers and investors have expressed concerns on changing the rules to benefit Aramco.

Saudi Aramco has hired JPMorgan Chase & Co., Morgan Stanley, HSBC Bank Plc, Moelis & Co. and Evercore Inc. to advise on the IPO. Independent Wall Street consultant Michael Klein is advising the oil ministry.