It took three years, and the process was the very definition of “fraught”, but crown prince Mohammed Bin Salman is on the verge of listing shares of Saudi Aramco, the kingdom’s crown jewel and the most profitable company on the planet.
The Saudi capital markets regulator has approved the IPO. It is expected to begin trading on the Tadawul in December. The prospectus will be released on November 9. The price, the number of shares to be sold, and the percentage of shares to be sold will all be announced at the end of the book- building period.
The state behemoth – which pumps around 10% of Earth’s oil – had $111 billion in net income in 2018, more than Apple, Google and Exxon combined.
In the first nine months of 2019, the company logged $68 billion in profits. For that same period, Aramco had sales of $244 billion. Capex will be between $35 billion and $40 billion in 2020 and between $40 billion and $45 billion in 2021.
A series of changes to the royalty regime were tipped on Sunday. They are as follows:
The Company and the Government executed an amendment to the Concession, which (effective as at 1 January 2020G): (i) reduces the royalty rate on crude oil and condensate production to 15% (from 20%) on Brent prices up to $70 per barrel; (ii) increases the marginal royalty rate to 45% (from 40%) on Brent prices above $70 per barrel up to $100 per barrel; and (iii) increases the marginal royalty rate to 80% (from 50%) on Brent prices above $100 per barrel.
That appears designed to pacify investors as does what looks to be a marked reduction in the tax rate applicable to the company’s downstream business. To wit, from the documents:
The Government determined that the tax rate applicable to the Company’s downstream business will be reduced from the 50% to 85% multi-tiered structure of income tax applicable to domestic oil and hydrocarbon production companies to the general corporate tax rate of 20% applicable to similar domestic downstream companies under the Income Tax Law, on the condition that the Company consolidate its downstream business under the control of a separate, wholly owned subsidiary before 31 December 2024G (effective as at 1 January 2020G).
Aramco will pay some $75 billion in dividends in 2020, on top of any special payouts. That could be boosted to $80 billion.
Saudi retail investors in the IPO will be awarded one free share (a “bonus share”) for every 10 allotted shares on the condition they “continuously and uninterruptedly” hold their allotted shares for 180 days from the first day of trading. Those bonus shares are limited to 100. (Call now while supplies last!)
Wealthy Saudis – many of whom were swept up in the farcical “corruption crackdown” that found the crown prince locking up relatives, royals and businessmen (categories which often overlap) in Riyadh’s Ritz-Carlton in November of 2017 – will be key to the IPO’s success. The Ritz shakedown produced some $100 billion for Riyadh. Now, many of those folks will be tapped for more, only this time, at least they’ll get something in return for their “contributions”.
“Local asset managers, including those looking after government funds, have also been asked to make significant contributions, while domestic banks have been told to lend generously so retail investors can buy Aramco shares”, Bloomberg said Saturday, citing people familiar with the situation.
Over the weekend, reports indicated that Prince Mohammed may have to settle for a valuation of between $1.6 trillion and $1.8 trillion, lower than the $2 trillion Riyadh was aiming at.
His efforts to woo the world have been complicated by a laundry list of concerns, including corporate governance issues, the lofty valuation, the October 2018 extrajudicial killing of journalist Jamal Khashoggi (which served as a macabre reminder to the world that pretensions to a “progressive” agenda aside, the crown prince is still an unelected autocrat capable of ruthless crackdowns on dissent) and, of course, the attacks on Abqaiq and Khurais.
Prince Mohammed green-lighted the IPO on Friday, at a meeting. The public offering is the cornerstone of his “Vision 2030” plan to transform the kingdom.
Here’s a list of everyone involved in the offering:
- Citigroup Saudi Arabia, Credit Suisse Saudi Arabia, Goldman Sachs Saudi Arabia, HSBC Saudi Arabia, J.P. Morgan Saudi Arabia Company, Merrill Lynch Kingdom of Saudi Arabia, Morgan Stanley Saudi Arabia, NCB Capital Company and Samba Capital & Investment Management Company have been appointed by the Company as joint financial advisors (collectively, the “Joint Financial Advisors”)
- Citigroup Global Markets Limited, Credit Suisse Securities (Europe) Limited, Goldman Sachs International, HSBC Saudi Arabia, J.P. Morgan Securities plc, Merrill Lynch Kingdom of Saudi Arabia, Morgan Stanley & Co. International plc, NCB Capital Company and Samba Capital & Investment Management Company have been appointed by the Company as joint global coordinators and joint bookrunners (collectively, the “Joint Global Coordinators”)
- Al Rajhi Capital, EFG Hermes KSA, GIB Capital, Riyad Capital and Saudi Fransi Capital have been appointed by the Company as domestic joint bookrunners (the “Domestic Joint Bookrunners”)
- Banco Santander, S.A., BNP PARIBAS, BOCI Asia Limited, Crédit Agricole Corporate and Investment Bank, Deutsche Bank AG, London Branch, First Abu Dhabi Bank PJSC, Mizuho International plc, RBC Europe Limited, SMBC Nikko Capital Markets Limited, Société Générale and UBS AG, London Branch have been appointed by the Company as foreign joint bookrunners (residing outside the Kingdom) (collectively, the “Foreign Joint Bookrunners (residing outside the Kingdom)” and, together with the Joint Global Coordinators and the Domestic Joint Bookrunners, the “Joint Bookrunners”)