Saudi Aramco IPO a step closer as decree creates new corporate structure

Saudi Aramco’s initial public offering could be the biggest in history, raising up to $100 billion. (Reuters)
Updated 05 January 2018
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Saudi Aramco IPO a step closer as decree creates new corporate structure

DUBAI: Saudi Arabia has taken a crucial step in its plans to privatize some of Saudi Aramco by changing the legal status of the national oil giant into a joint stock company.

By incorporating Aramco, the government will be able to offer equity in it either on domestic or foreign stock exchanges, or to any outside investor. 

The government has said it plans to sell 5 per cent of Aramco as part of the plan to reduce oil dependency and the role of the public sector under the Vision 2030 strategy.

A decree by the Council of Ministers to implement a change in Aramco’s legal status was published on several official sites. A spokesman for the company confirmed the move. “As a customary step in the preparation process for a Saudi initial public offering (IPO), Aramco has been registered and converted from a royal decree company to a joint stock company.

“This establishes the framework to allow future investors to hold shares in the company alongside its shareholder, the government,” the spokesman added.

According to one scenario for the privatization, Aramco would mount the biggest IPO in history, raising as much as $100 billion on international stock markets. Other possibilities being considered include an IPO on the Tadawul market in Riyadh, potentially alongside a private sale of shares to foreign investors.

The government is committed to an IPO in some form this year, and incorporation as a joint stock company shows that this process is on track. There has been speculation that the sale could be delayed or even canceled altogether.

“This is technical but is a necessary step toward the eventual sale. It means that the government will be in a position to push the button on a share sale, now that shares are in existence in a form that investors can hold,” said one Saudi banking source who did not wish to be identified.

Reuters, citing official Saudi sources, reported that Aramco has a fully paid up capital of SR60 billion ($16 billion), divided into 200 billion shares.

It added that the new board of Aramco will have 11 members, of whom six will be appointed by the government, with big shareholders allowed to propose board members at a general meeting of the company.

The government will retain the right to appoint or dismiss the chairman, currently Khalid Al-Falih, who is also energy minister, and to set oil prices, Reuters said.

Saudi Arabia has been the driving force behind a strategy to push oil prices higher by limiting global output of crude, in partnership with Russia. Yesterday Brent oil was trading at $68.02 per barrel, its highest level since late 2015, after the dramatic fall in value in the summer of 2014.

“There is still a lot to do. Apart from choosing the venue or venues for the IPO, Aramco and its advisers also have to decide the nature of the sale. Saudi citizens will be expecting some form of preferential pricing, and the mechanics of that are quite complicated,” said the Saudi banker. Some experts believe the IPO venue will be announced after a meeting of the company and its advisers later this month.

Several international exchanges have been vying for the lucrative right to stage the Aramco IPO. The New York Stock Exchange, the world’s biggest, is believed to be in contest with the London Stock Exchange, which has proposed some rule changes to accommodate the Saudi company.

Other contenders include Hong Kong, which could be an important venue if, as has been suggested, the Kingdom does a private deal with a big Chinese investor. Others intermittently in the frame for the IPO include Tokyo, Singapore and Toronto.

Once the Aramco IPO is set in train, it will signal the start of a further $200 billion worth of privatizations, with virtually all state-owned assets in the Kingdom for sale, from power generators and transport infrastructure through to hospitals, schools and even football clubs.


Unaoil’s former Iraq partner pleads guilty to bribery

Updated 30 min 28 sec ago
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Unaoil’s former Iraq partner pleads guilty to bribery

  • It is the first guilty plea to result from a three-year investigation by the Serious Fraud Office into suspected bribery and money laundering
  • Unaoil is a Monaco-based oil and gas firm

LONDON: The former partner in Iraq for Unaoil, a Monaco-based oil and gas consultancy, has pleaded guilty to five counts of bribery in the first conviction in a three-year criminal investigation by Britain’s Serious Fraud Office (SFO).
Basil Al Jarah, 70, pleaded guilty on July 15 to conspiring to give corrupt payments in connection with the award of contracts to supply and install single point moorings and oil pipelines in southern Iraq, the SFO said.
Al Jarah’s conviction, which comes six months before three other defendants in the case face a criminal trial in London, was announced after a judge lifted reporting restrictions in a pre-trial hearing on Friday, the SFO said.
Ziad Akle, Unaoil’s former territory manager for Iraq and Stephen Whiteley and Paul Bond, who worked for Dutch-based oil and gas services company SBM (Offshore), have pleaded not guilty.
Akle, 44, has been charged with three offenses of conspiracy to make corrupt payments. Bond, a 67-year-old former senior sales manager with SBM (Offshore), and Whiteley, a 64-year-old former vice president of SBM (Offshore) and one-time Unaoil general territories manager for Iraq, Kazakhstan and Angola, each face two counts.
Sam Healey, a lawyer at JMW Solicitors who is representing Whiteley, said his client “strenuously denied” all alleged offenses.
“Mr Whiteley co-operated fully with the SFO as they opened their enquiries and will rigorously defend the charges,” he said.
Lawyers for Al Jarah and Bond declined to comment. A lawyer for Akle was not immediately available for comment.
A spokeswoman for Unaoil declined to comment, while SBM Offshore has said it is company policy to not comment on past or current employees.