Saudi Aramco may create employee shareholders says US think tank

Saudi Aramco may create employee shareholders says US think tank
A view shows Saudi Aramco's Manifa oilfield. The oil giant is planning an initial public offering which could be the biggest in history. (Reuters)
Updated 04 April 2018

Saudi Aramco may create employee shareholders says US think tank

Saudi Aramco may create employee shareholders says US think tank
  • New Aramco charter outlines levels of protection for investors against state influence on the company
  • Aramco has around 55,000 employees, mostly Saudi citizens

DUBAI: Saudi Aramco could grant shares to employees in any forthcoming initial public offering, according to an analysis of the company charter it adopted at the beginning of the year.
The new charter also allows Aramco to issue different classes of shares, with the possibility of preferred stock paying higher dividends but with fewer voting rights, the analysis shows.
The revelations about the new corporate set-up at the Kingdom’s leading company, and the biggest oil exporter in the world, come in a paper for the Arabia Foundation, an American think-tank based in Washington DC, by Ellen Wald, non-resident scholar at the foundation and author of the forthcoming book “Saudi Inc.”
Wald and a team at the Foundation have translated and analyzed the charter document — previously available only in Arabic from Aramco — and highlighted what it means for the forthcoming IPO, which could be the biggest in history.
In addition to the provisions on employee and preferred shares, the analysis of the charter, adopted in January, highlights the fact that plans for the IPO are progressing and that Aramco plans to list shares on domestic and possibly foreign exchanges “in the near future.”
It spells out that Aramco’s future remains within the sectors of energy and petrochemicals, and will not become an arm of the Saudi government operating in wider industries.
It also outlines levels of protection for investors against state influence on the company, though concluding that “the state will have overwhelming influence on the board.”
An Aramco spokesman said he believed the analysis to be based on an accurate translation of the Arabic document. He added that there was no obligation on Aramco to publish an English version, though this might be available later.
The paper will add further fuel to the debate about the forthcoming IPO and its place within the Vision 2030 strategy to diversify the Saudi economy away from oil dependency.
Wald said: “Significantly, the charter provides insight into the future Aramco initial public offering and the ways it will benefit the Saudi economy and Saudi people during and after the state-led economic transformation. Although the charter does not directly inform on Aramco’s potential valuation, it raises important questions for future valuation.”
The implications for around 55,000 current Aramco employees — most of them Saudi citizens — will be significant.
“Providing Aramco stock to Saudi employees of Aramco could infuse the economy with cash from diffuse sources. This would decentralize wealth, increase commercialism (and private spending), raise real estate values, and perhaps encourage domestic investment in local small businesses. This infusion of wealth into private hands in Saudi Arabia, coupled with private and pension-plan purchases of Aramco stock, would mean that a large portion of Saudi Arabia would acquire a personal stake in the success and future of the largest company in the Kingdom,” Wald said.
“The opportunity for Saudis to own shares in Aramco would be an important contribution to the overall economic transformation of Saudi Arabia, which is currently a primary aim for the Saudi government. The government’s economic transformation plans are, in part, designed to incentivize the people to take a larger stake in their own economic futures,” she added.
The provisions on what kinds of shares can be offered in any further IPO could also have an effect on the eventual valuation of the company. “Although the charter only specifies one class of common stock, Aramco may offer a second class of preferred shares in the future. Preferred shares would limit voting rights but increase dividends, potentially indicating a higher valuation for Aramco while maintaining state control over the Aramco board,” Wald said.
The issuance of preferred shares would require a special shareholder meeting to approve the conversion of common shares.
“Preferred shares do not confer shareholder voting rights to the shareholders, but preferred shares do grant a higher share of the net profit of the company. In other words, preferred shares would offer a higher dividend, if the company creates them,” said Wald.
Higher dividend shares would affect the valuation of the company, which has also been a matter of debate. Some observers have suggested Aramco might struggle to make the $2 trillion estimate put on it when the IPO plans were announced two years ago.


Canadian firm pulls out of Carrefour takeover after France insists ‘No’

Canadian firm pulls out of Carrefour takeover after France insists ‘No’
Updated 20 min 27 sec ago

Canadian firm pulls out of Carrefour takeover after France insists ‘No’

Canadian firm pulls out of Carrefour takeover after France insists ‘No’
  • Carrefour has more than 12,300 stores in more than 30 countries and employs 320,000 people worldwide
  • Canada's Couche-Tard has offered to take over the French supermarket giant for 16 billion euro ($19.5 billion)

PARIS: Canadian convenience store chain Couche-Tard has reportedly pulled out of a multi-billion euro takeover of supermarket giant Carrefour after the French government said it would veto the deal.
Negotiations over the 16 billion euro ($19.5 billion) deal ended after a meeting between the French Minister of the Economy Bruno Le Maire and the founder of Couche-Tard Alain Bouchard, Bloomberg news agency said, citing sources.
French ministers had insisted Friday they would not agree to the takeover because it could jeopardize food security, an even more important consideration given the coronavirus pandemic.
In an attempt to reassure ministers, Bouchard had promised to invest billions in Carrefour, said he would maintain employment for two years and that the group would be listed on the Paris Stock Exchange in parallel with Canada, Bloomberg reported.
Contacted by AFP, neither Couche-Tard nor Carrefour had confirmed the information on Friday evening.
Although talks had stopped, anonymous sources cited by Bloomberg said negotiations could resume if the French government changes its position.
But on Friday, France’s Economy Minister made his choice public, telling BMTV and RMC: “My position is a polite, but clear and definitive ‘No’.”
“Food security is a strategic consideration for our country and one does not just hand over one of the large French distributors like that,” Le Maire said.
“Carrefour is the biggest private sector employer in France with nearly 100,000 employees,” he noted, and the group accounts for 20 percent of the food distribution market in the country.
The French statements have not convinced the Canadian government.
A Canadian federal source said while they could understand concerns over allowing a foreign firm to take over such a large national employer, concerns over food security were unsubstantiated.
“But we cannot accuse a leading Canadian company like Couche-Tard of endangering the food sovereignty of an entire country,” the source, who requested anonymity, told AFP.

'Food sovereignty'
On Wednesday, Couche-Tard submitted a non-binding offer for Carrefour, valuing the group at more than 16 billion euros ($19.5 billion).
Le Maire made clear immediately that he was not in favor of a deal involving “an essential link in food security for the French, of food sovereignty.”
The government’s reaction had caused “surprise” at Carrefour itself, according to sources who said the comments were “premature” given that merger discussions had barely begun.
“We haven’t decided yet whether the interest shown is attractive for us,” one company official said on condition of anonymity earlier in the week.
Carrefour has more than 12,300 stores of various formats in more than 30 countries and in 2019 generated a net profit of 1.3 billion euros ($1.5 billion) on revenue of 80.7 billion euros ($97.4 billion).
It employs 320,000 people worldwide.
Couche-Tard has a worldwide network of more than 14,200 stores and earned a net profit of $2.4 billion on sales of $54 billion in its last complete year.
In the United States and several European countries, as well as in Latin America and southeast Asia, it operates under Circle K and other brands.