Confident Al-Falih holds out hope for early Saudi Aramco IPO

Khalid Al-Falih: ‘When the Aramco-SABIC acquisition is consummated it will not only be the largest oil company and gas company, it will be a very large company in refining and petro-chemicals.’ (AFP)
Updated 25 April 2019
0

Confident Al-Falih holds out hope for early Saudi Aramco IPO

  • Speaking at the Financial Sector Conference in Riyadh, Al-Falih said that preparations for a listing of Aramco shares — an initial public offering (IPO) — could happen ‘sooner than you think’
  • The listing has been slated for 2021 according to government and company announcements, but Al-Falih’s comments raise the possibility that it could be brought forward to next year

RIYADH: Khalid Al-Falih, the Kingdom’s energy minister and chairman of Saudi Aramco, held out the tantalizing prospect that the giant oil company’s long-planned stock market listing could happen ahead of the previously announced schedule.
Speaking at the Financial Sector Conference in Riyadh, Al-Falih said that preparations for a listing of Aramco shares — an initial public offering (IPO) — could happen “sooner than you think” and that a prospectus for the listing could come “in the not too distant future.”
The listing has been slated for 2021 according to government and company announcements, but Al-Falih’s comments raise the possibility that it could be brought forward to next year, though the minister added the caveat that it could also be later. “That’s the announced date but it could slip a little bit, it could come forward a little bit,” he said.
The successful completion of a $12 billion international bond by Aramco, which attracted more than eight times that amount in interest from investors, has given Aramco a new confidence in international capital markets, in equity as well as bonds.
Al-Falih also said that the intended acquisition of petrochemicals giant SABIC from the Public Investment Fund would also increase its capital-raising ability.
“When the Aramco-SABIC acquisition is consummated — we hope by the end of this year — it will not only be the largest oil company and gas company by a large margin, but also with the combined company will be a very large company in refining and petrochemicals. So its capital base is going to grow and I think right that its balance sheet has an appropriate level of debt.
“Even if Saudi Aramco stays at the lower end of gearing among its peers, it still has the capacity to offer a lot of debt instruments going forward. So I can tell you for sure that the $12 billion is only the beginning, not the end. It establishes Aramco’s presence in the market,” he added.

 

Al-Falih also indicated that the large amount of disclosure required for the bond issue would be used in the IPO preparation.
“Now that the company has been exposed, investors have reacted so enthusiastically to the company and its quality. We’ve seen the reserves, we’ve seen the financials, we’ve seen the quality in terms of its departmental performance and its safety performance, human capital capability and technology, all of this is appealing.
“It’s been exposed and documented in the prospectus for the bonds and it will be exposed even more in the equity prospectus to come in the not-too-distant future.”
Al-Falih made it clear, however, that the IPO had to await full completion of the merger with SABIC: “Once we’ve done that, the financials are consolidated and exposed to the investors, essentially all the practical steps for
the IPO have been taken both by the company and by the government. So I think we can hit the ground running once we close on SABIC.”
He added that he hoped for speedy approval from regulators for the merger. Finance experts at the conference said that Al-Falih’s comments showed that Aramco and the Saudi government were committed to listing the company, but were skeptical over whether the IPO could happen next year, given the need for full incorporation of SABIC.
“Given the express desire to complete the SABIC deal, it will be challenging to accelerate the time line of the IPO before 2021,” Jamal Al-Kishi, chief executive of Deutsche Bank in the Middle East and Africa, told Arab News. “But I have very little doubt the company will be floated,” he added.
Tarek Fadlallah, chief executive officer of Nomura Asset Management in the region, said: “It seems unlikely that it can take place in 2020 because they’ll want to demonstrate a full year of integration and collaboration with SABIC.”

FASTFACTS

The completion of a $12 billion international bond by Aramco has given it a new confidence in global capital markets.


UK core pay growth strongest in nearly 11 years, but jobs growth slows

Data showed the unemployment rate remained at 3.8 percent as expected. (Shutterstock)
Updated 16 July 2019
0

UK core pay growth strongest in nearly 11 years, but jobs growth slows

  • Core earnings have increased by 3.6 percent annually, beating the median forecast of 3.5 percent
  • The unemployment rate fell by 51,000 to just under 1.3 million

LONDON: British wages, excluding bonuses, rose at their fastest pace in more than a decade in the three months to May, official data showed, but there were some signs that the labor market might be weakening. Core earnings rose by an annual 3.6 percent, beating the median forecast of 3.5 percent in a Reuters poll of economists. Including bonuses, pay growth also picked up to 3.4 percent from 3.2 percent, stronger than the 3.1 percent forecast in the poll. Britain’s labor market has been a silver lining for the economy since the Brexit vote in June 2016, something many economists attribute to employers preferring to hire workers that they can later lay off over making longer-term commitments to investment. The pick-up in pay has been noted by the Bank of England which says it might need to raise interest rates in response, assuming Britain can avoid a no-deal Brexit. Tuesday’s data showed the unemployment rate remained at 3.8 percent as expected, its joint-lowest since the three months to January 1975. The number of people out of work fell by 51,000 to just under 1.3 million. But the growth in employment slowed to 28,000, the weakest increase since the three months to August last year and vacancies fell to their lowest level in more than a year. Some recent surveys of companies have suggested employers are turning more cautious about hiring as Britain approaches its new Brexit deadline of Oct. 31. Both the contenders to be prime minister say they would leave the EU without a transition deal if necessary. A survey published last week showed that companies were more worried about Brexit than at any time since the decision to leave the European Union and they planned to reduce investment and hiring. “The labor market continues to be strong,” ONS statistician Matt Hughes said. “Regular pay is growing at its fastest rate for nearly 11 years in cash terms and its quickest for over three years after taking account of inflation.” The BoE said in May it expected wage growth of 3 percent at the end of this year.