Saudi Arabia starts the IPO of the world's largest oil company

DUBAI Saudi Arabia The state oil company began its initial public offer (IPO) on Sunday, announcing its intention to quote on the national stock exchange as the kingdom seeks to diversify and create the most valuable listed company in the world.

Aramco did not give a deadline or say how much of the company it would sell, but sources told Reuters that the oil company could offer between 1% and 2% of its shares in the local stock market, raising between $ 20 billion and $ 40 thousand millions.

Aramco said that the IPO would be divided into two tranches: one for institutional and individual investors. The percentage of shares that will be sold and the purchase price will be determined after the period of construction of the book, he said in a statement.

Confirmation of the share sale in Saudi Arabia n Oil Co, or Aramco, as the oil giant is usually known, comes about seven weeks after crippling attacks on its oil facilities, underlining Saudi Arabia 's determination to push on with the listing regardless.

The IPO of the most profitable company in the world is designed to boost the economic reform agenda of Crown Prince Mohammed bin Salman by raising billions to diversify the kingdom, whose dependence on oil was highlighted by the impact on the production of the attacks of the September 14.

Aramco said in Sunday's statement that it recorded a net income of $ 68 billion during the nine-month period that ended September 30. Revenue and other income related to sales for the same period amounted to $ 244 billion, he added.

Aramco plans to publish the IPO brochure on November 10, Saudi news channel Al-Arabiya said on Sunday, citing sources.

Aramco said the Saudi market regulator, which approved its request to quote on Sunday, had issued an exemption for non-resident institutional foreign investors to subscribe.

Saudi citizens would be eligible to receive additional actions.

The listing announcement was expected on October 20, but it was delayed after the advisors said they needed more time to lock up investors, three sources told Reuters.

To help get the deal done, Saudi Arabia is relying on easy credit for retail investors and hefty contributions from rich locals.

Valuation Challenge

Although Prince Mohammed put a valuation of $ 2 billion on the company in early 2016, bankers and company experts say Aramco's value is closer to $ 1.5 trillion.

A growing movement to combat climate change and adopt new green technologies has pushed some fund managers, particularly in Europe and the United States, from the oil and gas sector.

With a valuation of $ 1.5 billion, Aramco would still be worth at least 50% more than the world's most valuable companies, Microsoft and Apple, which have a market capitalization of approximately $ 1 billion.

But a 1% 'only' sale would raise around $ 15 billion for Saudi coffers, less than the $ 25 billion generated by Chinese e-commerce giant Alibaba in its unprecedented IPO in 2014.

I would classify Aramco as the 11th largest IPO of all time, as shown by Refinitiv data.

A 2% sale of Aramco shares at a valuation of $ 1.5 billion would make it the largest IPO of all time, beating Alibaba.

The prospect that the world's largest oil company sells a piece of itself has had Wall Street in suspense since Prince Mohammed marked it three years ago.

The initial hopes of a successful international price of around 5% faded when the sale of shares stopped last year in the middle of a debate on where to include Aramco abroad.

Aramco said the IPO calendar was delayed because it began a process to acquire a 70% stake in the petrochemical manufacturer Saudi Basic Industries Corp.

IPO preparations were revived during the summer after Aramco attracted great interest in its first international bond sale, seen as an exercise in building pre-IP relations with investors.

The sale of bonds forced the secret company to disclose its finances for the first time, including net income of $ 111 billion, more than a third more than the combined net income of the five major Exxon Mobil, Royal Dutch/Shell, BP , Chevron and Total.

Large oil companies have been increasing shareholder payments to counteract the growing pressure of climate activism.

Aramco said Sunday that it intended to declare aggregate ordinary cash dividends of at least $ 75 billion in 2020.

With a valuation of $ 1.5 billion, this would mean a dividend yield of 5%, below those offered by competitors such as Exxon Mobil Corp and Royal Dutch Shell.

Shell's dividend yield exceeds 6% and Exxon exceeds 5%, according to Refinitiv data.

The September attacks on the largest Aramco oil plant, which closed around 5% of the global supply, raised doubts about the vulnerability of Aramco's oil fields, plants and exports amid the deepening regional tensions.

Aramco hired nine banks as joint global coordinators to lead the IPO, including JPMorgan, Morgan Stanley and Saudi Arabia 's National Commerce Bank . He added a number of banks as bookrunners.