Saudi Aramco sets IPO share price between 30-32 riyals for ‘sale of the century’

Saudi Aramco also intends to buy $1 billion worth of shares for employees under a plan to incentivize executives and staff members. (AFP)
Updated 18 November 2019

Saudi Aramco sets IPO share price between 30-32 riyals for ‘sale of the century’

  • Final pricing for the Aramco shares would be announced on Dec. 5
  • The IPO could be worth least $24 billion, and values the state-owned oil giant at up to $1.71 trillion

DUBAI: The Saudi Arabian “sale of the century” — the initial public offering of shares in Saudi Aramco — moved into top gear with the announcement of pricing details and official valuation of the most profitable company in the world.

The Kingdom will sell a total of 3 billion shares in Aramco — around 1.5 percent of the total — at a valuation between SR30 ($8) and SR32 per shares, giving a total valuation of between $1.6 trillion and $1.7 trillion, making it the most valuable company in history.

Investment professionals welcomed the valuation, which was lower than the highest estimates of Aramco’s worth, as a “compromise” between the Kingdom and the financial world.

Tarek Fadhallah, CEO of Nomura Asset Management in the Middle East, said: “My first impression is that the price is a sensible compromise and that it will sell the IPO.”

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For more of our coverage of the Aramco IPO, click here.

To view key Aramco IPO documents, click here.

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Setting the price range and the number of shares to be sold starts the “bookbuilidng” process during which Aramco and its advisers will consult with potential investors and await bids from the institutions and private investors to decide at what level the shares will finally be sold.

A final pricing decision will come on Dec. 5, and trading is expected to start on the Tadawul shortly after.

Private investors — Saudi nationals, resident expatriates and Gulf nationals — will have to decide how many shares they want at the SR32 level, and wait to see if their application will be met in full.

If the final price is set lower than the top of the range, investors can have their money refunded or take up extra shares to an equivalent value.Aramco has decided not to market the shares via “roadshows” in certain markets because of a relaxation of Riyadh market rules that will allows foreign investors to buy shares on Tadawul.

The value of the stock on offer in the IPO will be between $24 billion and $25.6 billion — beating the existing record for a share issue set by Alibaba on the New York Stock exchange in 2014.

The proceeds from the sale — earmarked for investment into the diversification of the Saudi economy under the Vision 2030 reform plans — could go even higher depending on demand, with an extra chunk of shares allocated to advisers as part of the price stabilization mechanism.

Aramco is also committed to buying $1 billion in shares for its employees in an incentive scheme.


Lufthansa accepts tweaked demands by Brussels over state bailout

Updated 30 May 2020

Lufthansa accepts tweaked demands by Brussels over state bailout

  • Lufthansa and the rest of the airline sector have been hard hit by what is expected to be a protracted travel slump

BERLIN/FRANKFURT: Lufthansa’s management board has accepted a more favorable set of demands from the European Commission in exchange for approval of a $10 billion government bailout, the carrier said on Saturday, paving the way for its rescue.
The agreement comes after the airline’s supervisory board on Wednesday rejected an initial deal with Brussels including conditions that were significantly more painful.
Lufthansa and the rest of the airline sector have been hard hit by what is expected to be a protracted travel slump due to the coronavirus pandemic.
Under the latest agreement, Lufthansa said it will be obliged to transfer up to 24 takeoff and landing slots for up to four aircraft to one rival each at the Frankfurt and Munich airports.
This translates into three take-off and three landing rights per aircraft and day, it said, confirming what sources had earlier told Reuters.
“For one-and-a-half years, this option is only available to new competitors at the Frankfurt and Munich airports,” Lufthansa said, initially excluding budget carrier Ryanair. “If no new competitor makes use of this option, it will be extended to existing competitors at the respective airports.”
The previous deal had included forfeiting 72 slots used by 12 of 300 jets based at the Frankfurt and Munich airports, a source familiar with the matter said.
The slots, to be allocated in a bidding process, can be taken over only by a European peer that has not received any substantial state aid during the pandemic, Lufthansa said.
The Commission said once it has been officially notified by Germany on the aid package it will assess the issue as a matter of priority.
“(Lufthansa’s remedies will) enable a viable entry or expansion of activities by other airlines at these airports to the benefit of consumers and effective competition,” it said in a statement.
The airline’s supervisory board needs to approve the deal, Lufthansa said, adding it would convene an extraordinary general meeting to obtain shareholder approval for the bailout.
The largest German corporate rescue since the coronavirus crisis struck will see the government get a 20 percent stake in Lufthansa, which could rise to 25 percent plus one share in the event of a takeover attempt. A deal would also give the government two seats on Lufthansa’s supervisory board.
Rivals such as Franco-Dutch group Air France-KLM and US carriers American Airlines, United Airlines and Delta Air Lines are all seeking state aid due to the economic effects of the pandemic.
Germany, which has set up a $110 billion fund to take stakes in companies hit by the pandemic, said it plans to sell the Lufthansa stake by the end of 2023.
“The German government, Lufthansa and the European Commission have reached an important intermediate step in the aid negotiations,” the Economy Ministry said in a statement.
It said talks with the Commission over state aid would continue.