Is Trump buying shares in Aramco, as a New York IPO nears?
US president Donald Trump is today a politician, but if anyone has any illusions as to whether the Trump family business will shy away from a deal worth $100bn, when Aramco lists 5% of its shares for a company valued at $2trn, you can put them to rest.
On May 20th, 2017, Trump signed a $350bn arms deal with the Kingdom, the largest in American history.
In fact Trump, worth $3.1bn in 2017, himself beckoned Aramco to IPO at the New York Stock Exchange, where his Trump Tower headquarters deals with global businesses.
“Would very much appreciate Saudi Arabia doing their IPO of Aramco with the New York Stock Exchange. Important to the United States!” Trump tweeted on November 4, 2017.
Well, New York is one of many options, but is Aramco ready to make a deal?
According to Reuters, the status of Aramco is now a joint-stock company as of Jan. 1, preparing for the eventual initial public offering (IPO) planned for later this year.
The expected go ahead is in the second half of 2018, part of a diversification effort by the Kingdom away from oil, and smack in agreement with Saudi Vision 2030, a reform plan masterminded by Saudi Crown Prince Mohammad bin Salman.
The change, which was published in a cabinet decree in the kingdom’s official bulletin on Friday, is a requirement for local companies in Saudi Arabia ahead of listing, a senior Aramco source, who declined to be named, told Reuters.
“As a customary step in the preparation process for a Saudi IPO, Saudi Aramco has converted to a joint stock company,” the source said.
“This establishes the framework to allow future investors to hold shares in the company alongside its shareholder, the government.”
Crown Prince Mohammad told Reuters in October the IPO was still a go in 2018.
Aramco has a fully paid capital of $16bn divided into 200 billion ordinary shares, according to the company’s bylaws published in the official bulletin.
“The firm’s board will have 11 members and the power to list the company in domestic and international markets. The government will propose 6 members of Aramco’s board, but shareholders with a more than 0.1 percent stake will have the right to propose a member to the general assembly,” reported Reuters.
“The government will have the right to appoint or change the company’s chairman, a position currently held by Energy Minister Khalid al-Falih, and will remain the major shareholder of Aramco and retain the ultimate decision on output levels and production capacity.”
Ok, but is New York a good IPO choice?
NYSE- More robust than ever
The New York Stock Exchange raised more money for companies going public than any other market in 2017, according to CNN Money.
IPOs on Wall Street raised $33.4bn last year, allowing the NYSE to regain the top spot it last held in 2014, according to data from market intelligence firm Dealogic.
“The Hong Kong Stock Exchange had topped the league table in 2015 and 2016, but slipped back to fourth spot last year, trailing Shanghai and the Nasdaq as well as the NYSE,” said CNN Money.
“The New York Stock Exchange helped newly listed companies raise $33.4 billion in 2017.”
The New York market is preparing for two big deals on the horizon: Aramco and Uber.
Uber CEO Dara Khosrowshahi has confirmed that the company’s “target” is to go public in 2019.
Japan’s SoftBank recently reached a deal to buy a 15% stake in Uber now valued at $70bn The Japanese company, has dealings with Saudi Public Investment Funds (PIF), investing $15bn in NEOM, a 100% renewable city by the Red Sea, valued at 4500bn, and $10bn into Saudi Electricity company (SEC).
IPO listing options
Aramco may partially list at more than one share exchange sites, including New York, London, Tokyo and Hong Kong, but as well Saudi Tadawul.
They also left the door open for other options including an exclusive listing on the kingdom’s bourse Tadawul and an IPO coupled with a private placement to a strategic investor as a precursor to an international IPO.
And no matter where it lists, Aramco’s IPO will comply with regulations of both Tadawul and regulations of the international market where it will be listed, according to the official bulletin.
The Financial Times (FT) recently said that the listing could value the company at $2tn, although industry analysts predict a much smaller figure.
“A private sale is also being weighed by Riyadh,” said FT, rehashing news that China was once interested in making a privately held deal to buy shares at values higher than unofficial valuations ($1trn-$1.5trn) but lower than $2trn.
“There has been a split among Saudi Arabian officials about where to list. The country’s highest authorities have ambitions to list in New York, while ministers and Saudi Aramco executives have said London might be a better fit. Advisers say Hong Kong is an increasingly likely option if an international listing takes place, because of legal and regulatory hurdles in New York and London. Others believe a delay in any foreign listing is likely.”
Aramco stepping on gas before sale
Bloomberg said that Aramco is seeking to enlist the help of financial institutions to advise on plans to buy natural gas assets, ahead the planned IPO, quoting unnamed sources close to the matter. Similar arrangements are planned for Aramco’s IPO deal.
“Aramco, as the company is known, in late 2017 invited international banks to pitch for the advisory role to help identify acquisition targets,” said the people, as Aramco declined to comment.
Bloomberg reported that “Khalid Al-Falih, who is both Aramco chairman and the kingdom’s energy minister, said last month the company is looking for natural gas assets anywhere from the U.S. to East Africa and Russia as the kingdom’s state-owned energy giant hunts for ways to meet soaring domestic demand.”
Saudi Arabia diverts tens of millions of barrels of crude every year into its electricity generation plants while most of the gas it does pump goes to its petrochemicals industry.